Should You Investigate Mercury Systems, Inc. (NASDAQ:MRCY) At US$36.06?

While Mercury Systems, Inc. (NASDAQ:MRCY) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$40.38 at one point, and dropping to the lows of US$33.84. 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 Mercury Systems' current trading price of US$36.06 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Mercury Systems’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 Mercury Systems

Is Mercury Systems Still Cheap?

Mercury Systems appears to be overvalued by 37% at the moment, based on my discounted cash flow valuation. The stock is currently priced at US$36.06 on the market compared to my intrinsic value of $26.28. Not the best news for investors looking to buy! Another thing to keep in mind is that Mercury Systems’s share price is quite stable relative to the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.

Can we expect growth from Mercury Systems?

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. In the upcoming year, Mercury Systems' earnings are expected to increase by 74%, 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? It seems like the market has well and truly priced in MRCY’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 MRCY 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 tabs on MRCY for some time, 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 positive outlook is encouraging for MRCY, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about Mercury Systems as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 1 warning sign for Mercury Systems you should know about.

If you are no longer interested in Mercury 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.