SPS Commerce, Inc. (NASDAQ:SPSC), might not be a large cap stock, but it saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$215 and falling to the lows of US$165. 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 SPS Commerce's current trading price of US$166 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 SPS Commerce's outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is SPS Commerce Still Cheap?
According to our valuation model, SPS Commerce seems to be fairly priced at around 2.3% below our intrinsic value, which means if you buy SPS Commerce today, you'd be paying a fair price for it. And if you believe the company's true value is $170.33, then there's not much of an upside to gain from mispricing. In addition to this, SPS Commerce has a low beta, which suggests its share price is less volatile than the wider market.
What kind of growth will SPS Commerce generate?
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. SPS Commerce's earnings over the next few years are expected to increase by 55%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? SPSC'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 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 SPSC, now may not be the most advantageous 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. Every company has risks, and we've spotted 1 warning sign for SPS Commerce you should know about.
If you are no longer interested in SPS Commerce, 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.
