Is It Time To Consider Buying Cheetah Mobile Inc. (NYSE:CMCM)?

Cheetah Mobile Inc. (NYSE:CMCM), which is in the software business, and is based in China, saw significant share price movement during recent months on the NYSE, rising to highs of US$4.31 and falling to the lows of US$3.21. 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 Cheetah Mobile’s current trading price of US$3.30 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Cheetah Mobile’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Cheetah Mobile

What is Cheetah Mobile worth?

Great news for investors – Cheetah Mobile is still trading at a fairly cheap price. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 2.65x is currently well-below the industry average of 44.45x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, Cheetah Mobile’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What does the future of Cheetah Mobile look like?

NYSE:CMCM Past and Future Earnings, December 10th 2019
NYSE:CMCM Past and Future Earnings, December 10th 2019

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 Cheetah Mobile, it is expected to deliver a highly negative earnings growth in the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What this means for you:

Are you a shareholder? Although CMCM is currently undervalued, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to CMCM, 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 CMCM for a while, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Cheetah Mobile. You can find everything you need to know about Cheetah Mobile in the latest infographic research report. If you are no longer interested in Cheetah Mobile, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

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