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SDL plc (LON:SDL), which is in the software business, and is based in United Kingdom, maintained its current share price over the past couple of month on the LSE, with a relatively tight range of £5.1 to £5.6. However, does this price actually reflect the true value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at SDL’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What's the opportunity in SDL?
According to my valuation model, SDL seems to be fairly priced at around 3.21% above my intrinsic value, which means if you buy SDL today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is £5.23, there’s only an insignificant downside when the price falls to its real value. Furthermore, SDL’s low beta implies that the stock is less volatile than the wider market.
Can we expect growth from SDL?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. With profit expected to more than double over the next couple of years, the future seems bright for SDL. 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? It seems like the market has already priced in SDL’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping tabs on SDL, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, 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 SDL. You can find everything you need to know about SDL in the latest infographic research report. If you are no longer interested in SDL, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Thank you for reading.