Why Forrester Research, Inc. (NASDAQ:FORR) Could Be Worth Watching

While Forrester Research, Inc. (NASDAQ:FORR) might not be the most widely known stock at the moment, it saw a decent share price growth in the teens level on the NASDAQGS over the last few months. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s take a look at Forrester Research’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for Forrester Research

What's the opportunity in Forrester Research?

Forrester Research appears to be expensive according to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Forrester Research’s ratio of 36.51x is above its peer average of 17.73x, which suggests the stock is trading at a higher price compared to the Professional Services industry. In addition to this, it seems like Forrester Research’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will Forrester Research generate?

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. Though in the case of Forrester Research, it is expected to deliver a relatively unexciting earnings growth of 8.7%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for Forrester Research, at least in the near term.

What this means for you:

Are you a shareholder? It seems like the market has well and truly priced in FORR’s outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe FORR should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio 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 FORR for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Forrester Research at this point in time. For example - Forrester Research has 1 warning sign we think you should be aware of.

If you are no longer interested in Forrester Research, 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.