Is Altair Engineering Inc. (NASDAQ:ALTR) Potentially Undervalued?

While Altair Engineering Inc. (NASDAQ:ALTR) might not be the most widely known stock at the moment, it led the NASDAQGS gainers with a relatively large price hike in the past couple of weeks. As a mid-cap 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 Altair Engineering’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Altair Engineering

What's The Opportunity In Altair Engineering?

Altair Engineering appears to be overvalued by 40% at the moment, based on my discounted cash flow valuation. The stock is currently priced at US$66.89 on the market compared to my intrinsic value of $47.78. This means that the opportunity to buy Altair Engineering at a good price has disappeared! If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since Altair Engineering’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What does the future of Altair Engineering 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. 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. Altair Engineering's earnings over the next few years are expected to increase by 90%, 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? ALTR’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe ALTR should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. 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 tabs on ALTR for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for ALTR, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. In terms of investment risks, we've identified 1 warning sign with Altair Engineering, and understanding it should be part of your investment process.

If you are no longer interested in Altair Engineering, 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.