When Should You Buy SecureWorks Corp. (NASDAQ:SCWX)?

SecureWorks Corp. (NASDAQ:SCWX), might not be a large cap stock, but it saw a double-digit share price rise of over 10% in the past couple of months on the NASDAQGS. 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 take a look at SecureWorks’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for SecureWorks

What's the opportunity in SecureWorks?

Great news for investors – SecureWorks is still trading at a fairly cheap price. According to my valuation, the intrinsic value for the stock is $19.09, but it is currently trading at US$11.48 on the share market, meaning that there is still an opportunity to buy now. However, given that SecureWorks’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 does the future of SecureWorks look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Though in the case of SecureWorks, it is expected to deliver a highly negative earnings growth in the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What this means for you:

Are you a shareholder? Although SCWX is currently undervalued, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to SCWX, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping an eye on SCWX for a while, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Be aware that SecureWorks is showing 2 warning signs in our investment analysis and 1 of those is a bit concerning...

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This article by Simply Wall St is general in nature. 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.
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