At US$13.65, Is It Time To Put Bandwidth Inc. (NASDAQ:BAND) On Your Watch List?
Bandwidth Inc. (NASDAQ:BAND), is not the largest company out there, but it led the NASDAQGS gainers with a relatively large price hike in the past couple of weeks. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Bandwidth’s outlook and valuation to see if the opportunity still exists.
See our latest analysis for Bandwidth
What's The Opportunity In Bandwidth?
The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to 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 12.49x is currently trading in-line with its industry peers’ ratio, which means if you buy Bandwidth today, you’d be paying a relatively reasonable price for it. Although, there may be an opportunity to buy in the future. This is because Bandwidth’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What does the future of Bandwidth 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 an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Bandwidth, at least in the near future.
What This Means For You
Are you a shareholder? Currently, BAND appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on BAND, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on BAND for a while, now may not be the most advantageous time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystallize your views on BAND should the price fluctuate below the industry PE ratio.
If you'd like to know more about Bandwidth as a business, it's important to be aware of any risks it's facing. For instance, we've identified 3 warning signs for Bandwidth (2 don't sit too well with us) you should be familiar with.
If you are no longer interested in Bandwidth, 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.
