Is NIC Inc. (NASDAQ:EGOV) Potentially Undervalued?

NIC Inc. (NASDAQ:EGOV), which is in the it business, and is based in United States, saw a significant share price rise of over 20% in the past couple of months on the NASDAQGS. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Today I will analyse the most recent data on NIC’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for NIC

What is NIC worth?

Good news, investors! NIC is still a bargain right now. 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 26.82x is currently well-below the industry average of 36.24x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, NIC’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to move to its intrinsic value, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will NIC generate?

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. With profit expected to grow by a double-digit 17% over the next couple of years, the outlook is positive for NIC. 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? Since EGOV is currently undervalued, it may be a great time to increase your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on EGOV for a while, now might be the time to enter the stock. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy EGOV. 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 investment decision.

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

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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. Thank you for reading.