At US$134, Is Manhattan Associates, Inc. (NASDAQ:MANH) Worth Looking At Closely?

Manhattan Associates, Inc. (NASDAQ:MANH), might not be a large cap stock, but it saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$155 and falling to the lows of US$124. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Manhattan Associates' current trading price of US$134 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Manhattan Associates’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Manhattan Associates

What's the opportunity in Manhattan Associates?

Manhattan Associates appears to be expensive according to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 76.68x is currently well-above the industry average of 35.55x, meaning that it is trading at a more expensive price relative to its peers. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Manhattan Associates’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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Manhattan Associates 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. However, with a negative profit growth of -3.2% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Manhattan Associates. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? If you believe MANH should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. Given the uncertainty from negative growth in the future, this could be the right time to reduce your total portfolio risk. 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 an eye on MANH for a while, now may not be the best time to enter into the stock. Its price has risen beyond its industry peers, on top of a negative future outlook. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Should the price fall in the future, will you be well-informed enough to buy?

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. While conducting our analysis, we found that Manhattan Associates has 1 warning sign and it would be unwise to ignore this.

If you are no longer interested in Manhattan Associates, 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.