While ACI Worldwide, Inc. (NASDAQ:ACIW) might not have the largest market cap around , it saw a double-digit share price rise of over 10% in the past couple of months on the NASDAQGS. The company is inching closer to its yearly highs following the recent share price climb. As a mid-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, could the stock still be trading at a relatively cheap price? Let's examine ACI Worldwide's valuation and outlook in more detail to determine if there's still a bargain opportunity.
What's The Opportunity In ACI Worldwide?
According to our valuation model, ACI Worldwide seems to be fairly priced at around 9.7% below our intrinsic value, which means if you buy ACI Worldwide today, you'd be paying a fair price for it. And if you believe that the stock is really worth $39.21, 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 ACI Worldwide'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.
Can we expect growth from ACI Worldwide?
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. 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. With profit expected to grow by a double-digit 14% in the upcoming year, the short-term outlook is positive for ACI Worldwide. 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? ACIW'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 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 ACIW, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which 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.
With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. In terms of investment risks, we've identified 1 warning sign with ACI Worldwide, and understanding this should be part of your investment process.
If you are no longer interested in ACI Worldwide, 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.