Is LiveChat Software S.A. (WSE:LVC) Potentially Undervalued?

LiveChat Software S.A. (WSE:LVC), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the WSE over the last few months, increasing to zł129 at one point, and dropping to the lows of zł116. 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 LiveChat Software's current trading price of zł120 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 LiveChat Software’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 LiveChat Software

Is LiveChat Software still cheap?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 2.74% above my intrinsic value, which means if you buy LiveChat Software today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth PLN116.61, there’s only an insignificant downside when the price falls to its real value. Furthermore, LiveChat Software’s low beta implies that the stock is less volatile than the wider market.

What kind of growth will LiveChat Software generate?

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. LiveChat Software's earnings over the next few years are expected to increase by 52%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? LVC’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping an eye on LVC, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. To help with this, we've discovered 2 warning signs (1 shouldn't be ignored!) that you ought to be aware of before buying any shares in LiveChat Software.

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This article by Simply Wall St is general in nature. 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.
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