U.S. markets open in 4 hours 51 minutes
  • S&P Futures

    4,689.00
    -10.00 (-0.21%)
     
  • Dow Futures

    35,669.00
    -77.00 (-0.22%)
     
  • Nasdaq Futures

    16,358.50
    -33.75 (-0.21%)
     
  • Russell 2000 Futures

    2,261.20
    -8.60 (-0.38%)
     
  • Crude Oil

    72.08
    -0.28 (-0.39%)
     
  • Gold

    1,783.40
    -2.10 (-0.12%)
     
  • Silver

    22.29
    -0.14 (-0.63%)
     
  • EUR/USD

    1.1321
    -0.0023 (-0.20%)
     
  • 10-Yr Bond

    1.5090
    0.0000 (0.00%)
     
  • Vix

    20.33
    -1.56 (-7.13%)
     
  • GBP/USD

    1.3205
    -0.0002 (-0.01%)
     
  • USD/JPY

    113.5800
    -0.1570 (-0.14%)
     
  • BTC-USD

    49,168.93
    -1,135.32 (-2.26%)
     
  • CMC Crypto 200

    1,282.47
    -22.65 (-1.74%)
     
  • FTSE 100

    7,337.16
    +0.11 (+0.00%)
     
  • Nikkei 225

    28,725.47
    -135.15 (-0.47%)
     

Is Ubiquiti Inc. (NYSE:UI) Potentially Undervalued?

  • Oops!
    Something went wrong.
    Please try again later.
·3 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.

Let's talk about the popular Ubiquiti Inc. (NYSE:UI). The company's shares received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$338 at one point, and dropping to the lows of US$295. 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 Ubiquiti's current trading price of US$321 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 Ubiquiti’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Ubiquiti

Is Ubiquiti still cheap?

Ubiquiti appears to be expensive according to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 32.57x is currently well-above the industry average of 22.49x, meaning that it is trading at a more expensive price relative to its peers. But, is there another opportunity to buy low in the future? Since Ubiquiti’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 does the future of Ubiquiti look like?

earnings-and-revenue-growth
earnings-and-revenue-growth

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. With profit expected to grow by a double-digit 15% in the upcoming year, the short-term outlook is positive for Ubiquiti. 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? UI’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe UI should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio 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 UI for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for UI, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. At Simply Wall St, we found 1 warning sign for Ubiquiti and we think they deserve your attention.

If you are no longer interested in Ubiquiti, 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. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.