At US$55.02, Is Sprout Social, Inc. (NASDAQ:SPT) Worth Looking At Closely?

Sprout Social, Inc. (NASDAQ:SPT), might not be a large cap stock, but it saw a significant share price rise of over 20% in the past couple of months on the NASDAQCM. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Today I will analyse the most recent data on Sprout Social’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Sprout Social

What Is Sprout Social Worth?

According to my valuation model, Sprout Social seems to be fairly priced at around 12.20% above my intrinsic value, which means if you buy Sprout Social today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is $49.04, then there isn’t really any room for the share price grow beyond what it’s currently trading. In addition to this, Sprout Social has a low beta, which suggests its share price is less volatile than the wider market.

What kind of growth will Sprout Social generate?

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 Sprout Social, it is expected to deliver a negative earnings growth of -6.5%, 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? Currently, SPT appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on SPT for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on SPT should the price fluctuate below its true value.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. To help with this, we've discovered 3 warning signs (1 is a bit concerning!) that you ought to be aware of before buying any shares in Sprout Social.

If you are no longer interested in Sprout Social, 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.