Is There Now An Opportunity In Workday Inc (NASDAQ:WDAY)?
Let’s talk about the popular Workday Inc (NASDAQ:WDAY). The company’s shares received a lot of attention from a substantial price movement on the NasdaqGS over the last few months, increasing to $138.79 at one point, and dropping to the lows of $122.58. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Workday’s current trading price of $129.56 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 Workday’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. Check out our latest analysis for Workday
What is Workday worth?
Workday is currently overpriced based on my relative valuation model. I’ve used the price-to-book ratio in this instance because there’s not enough visibility to forecast its cash flows, and its earnings doesn’t seem to reflect its true value. The stock’s ratio of 16.81x is currently well-above the industry average of 3.99x, meaning that it is trading at a more expensive price relative to its peers. But, is there another opportunity to buy low in the future? Since Workday’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What kind of growth will Workday generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. However, with a negative profit growth of -4.22% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Workday. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? If you believe WDAY is currently trading above its peers, 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 tabs on WDAY for some time, now may not be the best time to enter into the stock. Price climbed passed its industry peers, in addition to a risky future outlook. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Should the price fall in the future, will you be well-informed enough to buy?
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Workday. You can find everything you need to know about Workday in the latest infographic research report. If you are no longer interested in Workday, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
