When Should You Buy Confluent, Inc. (NASDAQ:CFLT)?

Confluent, Inc. (NASDAQ:CFLT), is not the largest company out there, but it received a lot of attention from a substantial price increase on the NASDAQGS over the last few months. 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, could the stock still be trading at a relatively cheap price? Let’s take a look at Confluent’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Confluent

Is Confluent Still Cheap?

Confluent appears to be overvalued by 35% at the moment, based on my discounted cash flow valuation. The stock is currently priced at US$31.02 on the market compared to my intrinsic value of $23.03. This means that the buying opportunity has probably disappeared for now. Furthermore, Confluent’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

What kind of growth will Confluent generate?

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. Confluent's earnings over the next few years are expected to increase by 35%, 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? It seems like the market has well and truly priced in CFLT’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe CFLT 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 CFLT 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 optimistic prospect is encouraging for CFLT, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about Confluent as a business, it's important to be aware of any risks it's facing. You'd be interested to know, that we found 3 warning signs for Confluent and you'll want to know about these.

If you are no longer interested in Confluent, 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.