What Is PubMatic, Inc.'s (NASDAQ:PUBM) Share Price Doing?

PubMatic, Inc. (NASDAQ:PUBM), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the NASDAQGM over the last few months, increasing to US$24.02 at one point, and dropping to the lows of US$14.06. 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 PubMatic's current trading price of US$14.06 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 PubMatic’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 PubMatic

What Is PubMatic Worth?

PubMatic appears to be expensive according to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. We’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 34.87x is currently well-above the industry average of 14.51x, meaning that it is trading at a more expensive price relative to its peers. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that PubMatic’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 PubMatic 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. However, with a negative profit growth of -9.6% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for PubMatic. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? If you believe PUBM 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. Given the risk from a negative growth outlook, this could be the right time to reduce your total portfolio risk. 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 PUBM for a while, now may not be the best time to enter into the stock. Its price has risen beyond its industry peers, on top of a negative future outlook. However, there are also other important factors which we haven’t considered today, such as the track record of its management. Should the price fall in the future, will you be well-informed enough to buy?

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, we've found that PubMatic has 2 warning signs (1 makes us a bit uncomfortable!) that deserve your attention before going any further with your analysis.

If you are no longer interested in PubMatic, 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.