When Should You Buy Sprout Social, Inc. (NASDAQ:SPT)?

Sprout Social, Inc. (NASDAQ:SPT), might not be a large cap stock, but it saw a decent share price growth in the teens level on the NASDAQCM over the last few months. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Sprout Social’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Sprout Social

What's The Opportunity In Sprout Social?

According to my valuation model, Sprout Social seems to be fairly priced at around 2.35% above my intrinsic value, which means if you buy Sprout Social today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is $59.59, there’s only an insignificant downside when the price falls to its real value. In addition to this, Sprout Social has a low beta, which suggests its share price is less volatile than the wider market.

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. With profit expected to grow by 29% over the next couple of years, the future seems bright for Sprout Social. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? It seems like the market has already priced in SPT’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on SPT, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Our analysis shows 2 warning signs for Sprout Social (1 is significant!) and we strongly recommend you look at them before investing.

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.