What Is A10 Networks, Inc.'s (NYSE:ATEN) Share Price Doing?

While A10 Networks, Inc. (NYSE:ATEN) might not be the most widely known stock at the moment, it saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. As a small cap stock, which tends to lack high analyst coverage, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s examine A10 Networks’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for A10 Networks

What's the opportunity in A10 Networks?

Good news, investors! A10 Networks is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that A10 Networks’s ratio of 12.18x is below its peer average of 41.89x, which indicates the stock is trading at a lower price compared to the Software industry. Although, there may be another chance to buy again in the future. This is because A10 Networks’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

Can we expect growth from A10 Networks?

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Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for A10 Networks, at least in the near future.

What this means for you:

Are you a shareholder? Although ATEN is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. I recommend you think about whether you want to increase your portfolio exposure to ATEN, 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 an eye on ATEN for a while, but hesitant on making the leap, I 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'd like to know more about A10 Networks as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 4 warning signs for A10 Networks you should be mindful of and 1 of these doesn't sit too well with us.

If you are no longer interested in A10 Networks, 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.