Is It Too Late To Consider Buying Ambarella, Inc. (NASDAQ:AMBA)?

Ambarella, Inc. (NASDAQ:AMBA), is not the largest company out there, but it led the NASDAQGS gainers with a relatively large price hike in the past couple of weeks. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. With many analysts covering the mid-cap 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? Today we will analyse the most recent data on Ambarella’s outlook and valuation to see if the opportunity still exists.

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What's The Opportunity In Ambarella?

The stock seems fairly valued at the moment according to our valuation model. It’s trading around 8.2% below our intrinsic value, which means if you buy Ambarella today, you’d be paying a fair price for it. And if you believe the company’s true value is $67.73, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because Ambarella’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

Check out our latest analysis for Ambarella

What kind of growth will Ambarella generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Ambarella's earnings over the next few years are expected to increase by 22%, 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? AMBA’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping tabs on AMBA, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you'd like to know more about Ambarella as a business, it's important to be aware of any risks it's facing. In terms of investment risks, we've identified 3 warning signs with Ambarella, and understanding them should be part of your investment process.

If you are no longer interested in Ambarella, 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.