Is It Too Late To Consider Buying ePlus inc. (NASDAQ:PLUS)?
ePlus inc. (NASDAQ:PLUS), might not be a large cap stock, but it saw a significant share price rise of over 20% in the past couple of months on the NASDAQGS. With many analysts covering the 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? Today I will analyse the most recent data on ePlus’s outlook and valuation to see if the opportunity still exists.
See our latest analysis for ePlus
What is ePlus worth?
ePlus appears to be overvalued by 36% at the moment, based on my discounted cash flow valuation. The stock is currently priced at US$84.15 on the market compared to my intrinsic value of $61.68. This means that the buying opportunity has probably disappeared for now. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that ePlus’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of ePlus 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 relatively muted profit growth of 6.5% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for ePlus, at least in the short term.
What this means for you:
Are you a shareholder? PLUS’s 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 PLUS 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 an eye on PLUS for a while, 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 positive outlook means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
So while earnings quality is important, it's equally important to consider the risks facing ePlus at this point in time. Our analysis shows 2 warning signs for ePlus (1 makes us a bit uncomfortable!) and we strongly recommend you look at them before investing.
If you are no longer interested in ePlus, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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. 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.
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