Should You Investigate Gentrack Group Limited (NZSE:GTK) At NZ$9.44?

Gentrack Group Limited (NZSE:GTK), might not be a large cap stock, but it led the NZSE gainers with a relatively large price hike in the past couple of weeks. The company's trading levels have reached its high for the past year, following the recent bounce in the share price. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s examine Gentrack Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Gentrack Group

What Is Gentrack Group Worth?

Gentrack Group appears to be overvalued by 28% at the moment, based on our discounted cash flow valuation. The stock is currently priced at NZ$9.44 on the market compared to our intrinsic value of NZ$7.35. Not the best news for investors looking to buy! But, is there another opportunity to buy low in the future? Given that Gentrack Group’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 Gentrack Group look like?

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. 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. With profit expected to more than double over the next couple of years, the future seems bright for Gentrack Group. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? It seems like the market has well and truly priced in GTK’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe GTK should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on GTK for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for GTK, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. In terms of investment risks, we've identified 3 warning signs with Gentrack Group, and understanding these should be part of your investment process.

If you are no longer interested in Gentrack Group, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.