Altair Engineering Inc. (NASDAQ:ALTR), which is in the software business, and is based in United States, saw a significant share price rise of over 20% in the past couple of months on the NASDAQGS. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Altair Engineering’s outlook and value based on the most recent financial data to see if the opportunity still exists.
What's the opportunity in Altair Engineering?
Altair Engineering appears to be overvalued by 50% at the moment, based on my discounted cash flow valuation. The stock is currently priced at US$34.95 on the market compared to my intrinsic value of $23.34. This means that the opportunity to buy Altair Engineering at a good price has disappeared! If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since Altair Engineering’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 Altair Engineering generate?
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. In the upcoming year, Altair Engineering’s earnings are expected to increase by 89%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? ALTR’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe ALTR 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. 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 ALTR for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for ALTR, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Altair Engineering. You can find everything you need to know about Altair Engineering in the latest infographic research report. If you are no longer interested in Altair Engineering, 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 email@example.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.
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