At CA$36.18, Is It Time To Put Enghouse Systems Limited (TSE:ENGH) On Your Watch List?

Enghouse Systems Limited (TSE:ENGH), is not the largest company out there, but it saw a double-digit share price rise of over 10% in the past couple of months on the TSX. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Today I will analyse the most recent data on Enghouse Systems’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Enghouse Systems

Is Enghouse Systems Still Cheap?

According to my valuation model, Enghouse Systems seems to be fairly priced at around 15% below my intrinsic value, which means if you buy Enghouse Systems today, you’d be paying a reasonable price for it. And if you believe the company’s true value is CA$42.53, then there’s not much of an upside to gain from mispricing. What's more, Enghouse Systems’s share price may be more stable over time (relative to the market), as indicated by its low beta.

Can we expect growth from Enghouse Systems?

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 matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a negative profit growth of -11% expected next year, near-term growth certainly doesn’t appear to be a driver for a buy decision for Enghouse Systems. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? ENGH seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on ENGH for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on ENGH should the price fluctuate below its true value.

Since timing is quite important when it comes to individual stock picking, it's worth taking a look at what those latest analysts forecasts are. At Simply Wall St, we have the analysts estimates which you can view by clicking here.

If you are no longer interested in Enghouse Systems, 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.