What Does Sprout Social, Inc.'s (NASDAQ:SPT) Share Price Indicate?

While Sprout Social, Inc. (NASDAQ:SPT) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the NASDAQCM, rising to highs of US$57.14 and falling to the lows of US$42.63. 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 Sprout Social's current trading price of US$46.32 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 Sprout Social’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 Sprout Social

What Is Sprout Social Worth?

Great news for investors – Sprout Social is still trading at a fairly cheap price. According to my valuation, the intrinsic value for the stock is $67.16, but it is currently trading at US$46.32 on the share market, meaning that there is still an opportunity to buy now. Sprout Social’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 does the future of Sprout Social 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. However, with a negative profit growth of -5.1% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Sprout Social. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Although SPT is currently undervalued, the adverse prospect of negative growth brings about some degree of risk. I recommend you think about whether you want to increase your portfolio exposure to SPT, 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 tabs on SPT for some time, but hesitant on making the leap, I recommend you research further 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.

If you want to dive deeper into Sprout Social, you'd also look into what risks it is currently facing. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of 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.