IAC Inc. (NASDAQ:IAC), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$57.67 at one point, and dropping to the lows of US$48.61. 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 IAC's current trading price of US$49.57 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 IAC's outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is IAC Still Cheap?
Good news, investors! IAC is still a bargain right now according to our price multiple model, which compares the company's price-to-earnings ratio to the industry average. We'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 16.6x is currently well-below the industry average of 24.83x, meaning that it is trading at a cheaper price relative to its peers. However, given that IAC'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.
Can we expect growth from IAC?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it's the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Though in the case of IAC, it is expected to deliver a highly negative earnings growth in the next few years, which doesn't help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What This Means For You
Are you a shareholder? Although IAC is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. We recommend you think about whether you want to increase your portfolio exposure to IAC, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you've been keeping tabs on IAC for some time, but hesitant on making the leap, we recommend you research further into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
If you want to dive deeper into IAC, you'd also look into what risks it is currently facing. For example, we've found that IAC has 2 warning signs (1 makes us a bit uncomfortable!) that deserve your attention before going any further with your analysis.
If you are no longer interested in IAC, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.