Today we're going to take a look at the well-established VeriSign, Inc. (NASDAQ:VRSN). The company's stock saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$219 and falling to the lows of US$198. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether VeriSign's current trading price of US$207 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at VeriSign’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is VeriSign still cheap?
VeriSign appears to be overvalued by 28% at the moment, based on my discounted cash flow valuation. The stock is currently priced at US$207 on the market compared to my intrinsic value of $161.65. This means that the buying opportunity has probably disappeared for now. In addition to this, it seems like VeriSign’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
What does the future of VeriSign look like?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a negative profit growth of -1.4% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for VeriSign. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? If you believe VRSN should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. Given the uncertainty from negative growth in the future, this could be the right time to reduce your total portfolio risk. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on VRSN for a while, now may not be the best time to enter into the stock. Price climbed passed its true value, in addition to a risky future outlook. However, there are also other important factors which we haven’t considered today, such as the track record of its management. Should the price fall in the future, will you be well-informed enough to buy?
So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. In terms of investment risks, we've identified 2 warning signs with VeriSign, and understanding these should be part of your investment process.
If you are no longer interested in VeriSign, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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