Is It Time To Consider Buying Stem, Inc. (NYSE:STEM)?

While Stem, Inc. (NYSE:STEM) might not have the largest market cap around , it saw a significant share price rise of 22% in the past couple of months on the NYSE. While good news for shareholders, the company has traded much higher in the past year. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s examine Stem’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Stem

Is Stem Still Cheap?

The stock is currently trading at US$0.38 on the share market, which means it is overvalued by 23% compared to our intrinsic value of $0.31. Not the best news for investors looking to buy! But, is there another opportunity to buy low in the future? Since Stem’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from Stem?

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. 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. Stem's earnings over the next few years are expected to increase by 92%, 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? STEM’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe STEM 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 STEM 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 STEM, 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 Stem as a business, it's important to be aware of any risks it's facing. Be aware that Stem is showing 5 warning signs in our investment analysis and 2 of those are potentially serious...

If you are no longer interested in Stem, 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.