Splunk Inc. (NASDAQ:SPLK) saw a decent share price growth in the teens level on the NASDAQGS over the last few months. As a large-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? Today I will analyse the most recent data on Splunk’s outlook and valuation to see if the opportunity still exists.
Is Splunk still cheap?
Good news, investors! Splunk is still a bargain right now. According to my valuation, the intrinsic value for the stock is $218.10, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. Although, there may be another chance to buy again in the future. This is because Splunk’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 kind of growth will Splunk 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. 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. However, with a relatively muted profit growth of 0.7% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Splunk, at least in the short term.
What this means for you:
Are you a shareholder? Even though growth is relatively muted, since SPLK is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on SPLK for a while, now might be the time to make a leap. Its future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy SPLK. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.
If you'd like to know more about Splunk as a business, it's important to be aware of any risks it's facing. For example - Splunk has 2 warning signs we think you should be aware of.
If you are no longer interested in Splunk, 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. 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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Splunk Inc., together with its subsidiaries, provides software and cloud solutions that deliver and operationalize insights from the data generated by digital systems in the United States and internationally.
High growth potential and good value.