Is There Now An Opportunity In Optiva Inc. (TSE:OPT)?

While Optiva Inc. (TSE:OPT) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the TSX, rising to highs of CA$17.00 and falling to the lows of CA$7.90. 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 Optiva's current trading price of CA$7.90 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 Optiva’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Optiva

Is Optiva Still Cheap?

According to my valuation model, Optiva seems to be fairly priced at around 11.32% above my intrinsic value, which means if you buy Optiva today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth CA$7.10, there’s only an insignificant downside when the price falls to its real value. What's more, Optiva’s share price may be more stable over time (relative to the market), as indicated by its low beta.

What does the future of Optiva 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 an expected decline of -1.7% in revenues over the next year, short term growth isn’t a driver for a buy decision for Optiva. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? OPT seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal 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 OPT for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The stock appears 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 gel your views on OPT should the price fluctuate below its true value.

So while earnings quality is important, it's equally important to consider the risks facing Optiva at this point in time. Our analysis shows 3 warning signs for Optiva (1 is significant!) and we strongly recommend you look at them before investing.

If you are no longer interested in Optiva, 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.