Sprout Social, Inc. (NASDAQ:SPT), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the NASDAQCM over the last few months, increasing to US$69.13 at one point, and dropping to the lows of US$47.03. 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 Sprout Social's current trading price of US$47.91 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Sprout Social’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What's The Opportunity In Sprout Social?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 4.79% above my intrinsic value, which means if you buy Sprout Social today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth $45.72, there’s only an insignificant downside when the price falls to its real value. What's more, Sprout Social’s share price may be more stable over time (relative to the market), as indicated by its low beta.
What does the future of Sprout Social 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 31% over the next couple of years, the future seems bright for Sprout Social. 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? SPT’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping tabs on SPT, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. In terms of investment risks, we've identified 3 warning signs with Sprout Social, and understanding them should be part of your investment process.
If you are no longer interested in Sprout Social, 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.
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