Should You Think About Buying PDF Solutions, Inc. (NASDAQ:PDFS) Now?

PDF Solutions, Inc. (NASDAQ:PDFS), 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. 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, what if the stock is still a bargain? Let’s examine PDF Solutions’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for PDF Solutions

What's The Opportunity In PDF Solutions?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 7.44% above my intrinsic value, which means if you buy PDF Solutions today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth $34.79, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because PDF Solutions’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.

What does the future of PDF Solutions look like?

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. 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. In PDF Solutions' case, its revenues over the next few years are expected to grow by 36%, indicating a highly optimistic future ahead. If expense does not increase by the same rate, or higher, this top line growth should lead to stronger cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? It seems like the market has already priced in PDFS’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping an eye on PDFS, 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 PDF Solutions as a business, it's important to be aware of any risks it's facing. To that end, you should learn about the 2 warning signs we've spotted with PDF Solutions (including 1 which makes us a bit uncomfortable).

If you are no longer interested in PDF Solutions, 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.