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New Relic, Inc. (NYSE:NEWR), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the NYSE over the last few months. 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? Today I will analyse the most recent data on New Relic’s outlook and valuation to see if the opportunity still exists.
What is New Relic worth?
Great news for investors – New Relic is still trading at a fairly cheap price. According to my valuation, the intrinsic value for the stock is $107.28, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. New Relic’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
What kind of growth will New Relic 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. 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 New Relic, it is expected to deliver a relatively unexciting earnings growth of 7.2%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for New Relic, at least in the near term.
What this means for you:
Are you a shareholder? Even though growth is relatively muted, since NEWR is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on NEWR for a while, now might be the time to enter the stock. Its future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy NEWR. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed buy.
If you want to dive deeper into New Relic, you'd also look into what risks it is currently facing. For example, we've discovered 2 warning signs that you should run your eye over to get a better picture of New Relic.
If you are no longer interested in New Relic, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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.
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