Today we're going to take a look at the well-established NortonLifeLock Inc. (NASDAQ:NLOK). The company's stock received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$26.74 at one point, and dropping to the lows of US$21.81. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether NortonLifeLock's current trading price of US$22.73 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at NortonLifeLock’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is NortonLifeLock Still Cheap?
Good news, investors! NortonLifeLock is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that NortonLifeLock’s ratio of 15.2x is below its peer average of 42.77x, which indicates the stock is trading at a lower price compared to the Software industry. Another thing to keep in mind is that NortonLifeLock’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its industry peers, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.
What does the future of NortonLifeLock look like?
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. NortonLifeLock's earnings over the next few years are expected to increase by 41%, 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? Since NLOK is currently below the industry PE ratio, it may be a great time to increase 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 price multiple.
Are you a potential investor? If you’ve been keeping an eye on NLOK for a while, now might be the time to enter the stock. Its prosperous future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy NLOK. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed assessment.
If you want to dive deeper into NortonLifeLock, you'd also look into what risks it is currently facing. For instance, we've identified 3 warning signs for NortonLifeLock (1 shouldn't be ignored) you should be familiar with.
If you are no longer interested in NortonLifeLock, 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.
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