At US$4.16, Is It Time To Put System1, Inc. (NYSE:SST) On Your Watch List?

System1, Inc. (NYSE:SST), might not be a large cap stock, but it saw a significant share price rise of 43% in the past couple of months on the NYSE. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. Less-covered, small caps tend to present 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 examine System1’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

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Is System1 Still Cheap?

The stock seems fairly valued at the moment according to our valuation model. It’s trading around 5.05% above our intrinsic value, which means if you buy System1 today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is $3.96, there’s only an insignificant downside when the price falls to its real value. So, is there another chance to buy low in the future? Given that System1’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

Check out our latest analysis for System1

Can we expect growth from System1?

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 System1, it is expected to deliver a negative revenue growth of -1.2% next year, 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? SST seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on SST for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on SST should the price fluctuate below its true value.

If you'd like to know more about System1 as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 3 warning signs for System1 you should be mindful of and 2 of these make us uncomfortable.

If you are no longer interested in System1, 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.