While Avalara, Inc. (NYSE:AVLR) might not be the most widely known stock at the moment, it saw a significant share price rise of over 20% in the past couple of months on the NYSE. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s take a look at Avalara’s outlook and value based on the most recent financial data to see if the opportunity still exists.
What's the opportunity in Avalara?
According to my valuation model, Avalara seems to be fairly priced at around 2.0% below my intrinsic value, which means if you buy Avalara today, you’d be paying a fair price for it. And if you believe the company’s true value is $94.78, then there isn’t much room for the share price grow beyond what it’s currently trading. What's more, Avalara’s share price may be more stable over time (relative to the market), as indicated by its low beta.
What does the future of Avalara look like?
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 -9.7% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Avalara. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? AVLR seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on AVLR for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on AVLR should the price fluctuate below its true value.
If you'd like to know more about Avalara as a business, it's important to be aware of any risks it's facing. For example, we've found that Avalara has 5 warning signs (1 is a bit unpleasant!) that deserve your attention before going any further with your analysis.
If you are no longer interested in Avalara, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.