Why GoPro, Inc. (NASDAQ:GPRO) Could Be Worth Watching

By
Simply Wall St
Published
April 18, 2022
NasdaqGS:GPRO
Source: Shutterstock

While GoPro, Inc. (NASDAQ:GPRO) 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. 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 GoPro’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for GoPro

What's the opportunity in GoPro?

Great news for investors – GoPro is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 3.69x is currently well-below the industry average of 9.05x, meaning that it is trading at a cheaper price relative to its peers. However, given that GoPro’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 kind of growth will GoPro generate?

earnings-and-revenue-growth
NasdaqGS:GPRO Earnings and Revenue Growth April 18th 2022

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 GoPro, it is expected to deliver a highly negative earnings growth in the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What this means for you:

Are you a shareholder? Although GPRO is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to GPRO, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping an eye on GPRO for a while, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

If you'd like to know more about GoPro as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 4 warning signs for GoPro you should be mindful of and 2 of these can't be ignored.

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

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