Is PC Connection, Inc. (NASDAQ:CNXN) Potentially Undervalued?

PC Connection, Inc. (NASDAQ:CNXN), which is in the electronic business, and is based in United States, saw significant share price movement during recent months on the NASDAQGS, rising to highs of $37.24 and falling to the lows of $31.74. 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 PC Connection’s current trading price of $33.45 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 PC Connection’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for PC Connection

What’s the opportunity in PC Connection?

According to my valuation model, PC Connection seems to be fairly priced at around 16% below my intrinsic value, which means if you buy PC Connection today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth $39.84, then there’s not much of an upside to gain from mispricing. Is there another opportunity to buy low in the future? Since PC Connection’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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 kind of growth will PC Connection generate?

NasdaqGS:CNXN Past and Future Earnings, July 29th 2019
NasdaqGS:CNXN Past and Future Earnings, July 29th 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 PC Connection, it is expected to deliver a relatively unexciting earnings growth of 2.4%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for PC Connection, at least in the near term.

What this means for you:

Are you a shareholder? It seems like the market has already priced in CNXN’s future outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on CNXN, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook 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.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on PC Connection. You can find everything you need to know about PC Connection in the latest infographic research report. If you are no longer interested in PC Connection, 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.