Is It Time To Consider Buying Softcat plc (LON:SCT)?

Softcat plc (LON:SCT), is not the largest company out there, but it saw a decent share price growth in the teens level on the LSE over the last few months. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s take a look at Softcat’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Softcat

What Is Softcat Worth?

Good news, investors! Softcat is still a bargain right now. According to my valuation, the intrinsic value for the stock is £18.92, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. Softcat’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

Can we expect growth from Softcat?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with a relatively muted profit growth of 8.3% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Softcat, at least in the short term.

What This Means For You

Are you a shareholder? Even though growth is relatively muted, since SCT is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.

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

So while earnings quality is important, it's equally important to consider the risks facing Softcat at this point in time. Case in point: We've spotted 1 warning sign for Softcat you should be aware of.

If you are no longer interested in Softcat, 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.