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Luna Innovations Incorporated (NASDAQ:LUNA), is not the largest company out there, but it led the NASDAQCM gainers with a relatively large price hike in the past couple of weeks. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Today I will analyse the most recent data on Luna Innovations’s outlook and valuation to see if the opportunity still exists.
What is Luna Innovations worth?
Good news, investors! Luna Innovations is still a bargain right now. According to my valuation, the intrinsic value for the stock is $8.21, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. What’s more interesting is that, Luna Innovations’s share price is theoretically quite stable, which could mean two things: firstly, it may take the share price a while to move to its intrinsic value, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
What kind of growth will Luna Innovations generate?
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 revenues expected to grow by a double-digit 16% in the upcoming year, the outlook is positive for Luna Innovations. If the level of expenses is able to be maintained, 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? Since LUNA is currently undervalued, it may be a great time to increase your holdings in the stock. With a positive 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 capital structure to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on LUNA for a while, now might be the time to enter the stock. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy LUNA. 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 buy.
So while earnings quality is important, it's equally important to consider the risks facing Luna Innovations at this point in time. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Luna Innovations.
If you are no longer interested in Luna Innovations, 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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