Agilysys, Inc. (NASDAQ:AGYS), might not be a large cap stock, but it saw a decent share price growth of 14% on the NASDAQGS over the last few months. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. 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 Agilysys's valuation and outlook in more detail to determine if there's still a bargain opportunity.
Is Agilysys Still Cheap?
Good news, investors! Agilysys 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. In this instance, we've used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock's cash flows. we find that Agilysys's ratio of 29.05x is below its peer average of 38.91x, which indicates the stock is trading at a lower price compared to the Software industry. What's more interesting is that, Agilysys's share price is quite stable, which could mean two things: firstly, it may take the share price a while to move closer to its industry peers, 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.
Can we expect growth from Agilysys?
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. However, with an extremely negative double-digit change in profit expected next year, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Agilysys, at least in the near future.
What This Means For You
Are you a shareholder? Although AGYS is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to AGYS, 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 AGYS 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.
In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Be aware that Agilysys is showing 4 warning signs in our investment analysis and 2 of those are concerning...
If you are no longer interested in Agilysys, 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.