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Today we're going to take a look at the well-established Trimble Inc. (NASDAQ:TRMB). The company's stock led the NASDAQGS gainers with a relatively large price hike in the past couple of weeks. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s examine Trimble’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What's the opportunity in Trimble?
Trimble appears to be overvalued by 38% at the moment, based on my discounted cash flow valuation. The stock is currently priced at US$81.11 on the market compared to my intrinsic value of $58.95. This means that the opportunity to buy Trimble at a good price has disappeared! If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Trimble’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 Trimble look like?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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 39% over the next couple of years, the future seems bright for Trimble. 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 well and truly priced in TRMB’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe TRMB 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 tabs on TRMB for some time, 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 is encouraging for TRMB, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
If you'd like to know more about Trimble as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 2 warning signs for Trimble you should be aware of.
If you are no longer interested in Trimble, 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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