While Guidewire Software, Inc. (NYSE:GWRE) might not be the most widely known stock at the moment, 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 to have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Today I will analyze the most recent data on Guidewire Software’s outlook and valuation to see if the opportunity still exists.
View our latest analysis for Guidewire Software
What’s The Opportunity In Guidewire Software?
According to my valuation model, Guidewire Software seems to be fairly priced at around 2.2% below my intrinsic value, which means if you buy Guidewire Software today, you’d be paying a fair price for it. And if you believe that the stock is really worth $71.07, 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 Guidewire Software’s share is fairly volatile (ie 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.
What kind of growth will Guidewire Software 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 matters most, a more compelling investment theses would be high growth potential at a cheap price. With profits expected to grow by 71% over the next couple of years, the future seems bright for Guidewire Software. 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? GWRE’s optimistic future growth appears to have 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 conviction to buy should the price fluctuate below the true value?
Are you a potential investor? If you’ve been keeping an eye on GWRE, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
So while earnings quality is important, it’s equally important to consider the risks facing Guidewire Software at this point in time. Case in point: We’ve spotted 2 warning signs for Guidewire Software you should be aware of.
If you are no longer interested in Guidewire Software, you can use our free platform to view 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.
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