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What Is Serko Limited's (NZSE:SKO) Share Price Doing?

Simply Wall St

Serko Limited (NZSE:SKO), which is in the software business, and is based in New Zealand, received a lot of attention from a substantial price increase on the NZSE over the last few months. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine Serko’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Serko

Is Serko still cheap?

Great news for investors – Serko is still trading at a fairly cheap price. According to my valuation, the intrinsic value for the stock is NZ$7.14, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. What’s more interesting is that, Serko’s share price is theoretically quite stable, which could mean two things: firstly, it may take the share price a while to move to its intrinsic value, 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 Serko look like?

NZSE:SKO Past and Future Earnings, December 5th 2019

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. 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. With revenues expected to grow by 69% over the next couple of years, the future seems bright for Serko. If the level of expenses is able to be maintained, it looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? Since SKO is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on SKO for a while, now might be the time to make a leap. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy SKO. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Serko. You can find everything you need to know about Serko in the latest infographic research report. If you are no longer interested in Serko, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.