Proofpoint, Inc. (NASDAQ:PFPT), which is in the software business, and is based in United States, received a lot of attention from a substantial price increase on the NASDAQGM over the last few months. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s examine Proofpoint’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What's the opportunity in Proofpoint?
According to my valuation model, Proofpoint seems to be fairly priced at around 11% below my intrinsic value, which means if you buy Proofpoint today, you’d be paying a reasonable price for it. And if you believe the company’s true value is $138.17, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that Proofpoint’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will Proofpoint generate?
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 a relatively muted profit growth of 8.3% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Proofpoint, at least in the short term.
What this means for you:
Are you a shareholder? It seems like the market has already priced in PFPT’s future outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping tabs on PFPT, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Proofpoint. You can find everything you need to know about Proofpoint in the latest infographic research report. If you are no longer interested in Proofpoint, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.