Is Mach7 Technologies Limited (ASX:M7T) Potentially Undervalued?

While Mach7 Technologies Limited (ASX:M7T) might not be the most widely known stock at the moment, it saw a double-digit share price rise of over 10% in the past couple of months on the ASX. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s examine Mach7 Technologies’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Mach7 Technologies

What's the opportunity in Mach7 Technologies?

Good news, investors! Mach7 Technologies is still a bargain right now. My valuation model shows that the intrinsic value for the stock is A$0.81, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. However, given that Mach7 Technologies’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of Mach7 Technologies look like?

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. However, with a negative profit growth of -5.4% expected next year, near-term growth certainly doesn’t appear to be a driver for a buy decision for Mach7 Technologies. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? Although M7T is currently undervalued, the negative outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to M7T, 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 tabs on M7T for some time, 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.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. At Simply Wall St, we found 1 warning sign for Mach7 Technologies and we think they deserve your attention.

If you are no longer interested in Mach7 Technologies, you can use our free platform to see 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.