Let's talk about the popular Atlassian Corporation Plc (NASDAQ:TEAM). The company's shares saw a significant share price rise of over 20% in the past couple of months on the NASDAQGS. 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. But what if there is still an opportunity to buy? Let’s examine Atlassian’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What is Atlassian worth?
According to my valuation model, Atlassian seems to be fairly priced at around 0.7% below my intrinsic value, which means if you buy Atlassian today, you’d be paying a fair price for it. And if you believe the company’s true value is $403.58, then there isn’t much room for the share price grow beyond what it’s currently trading. In addition to this, Atlassian has a low beta, which suggests its share price is less volatile than the wider market.
Can we expect growth from Atlassian?
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. In the upcoming year, Atlassian's earnings are expected to increase by 98%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has already priced in TEAM’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 track record of its management team. 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 TEAM, now may not be the most advantageous 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 while earnings quality is important, it's equally important to consider the risks facing Atlassian at this point in time. At Simply Wall St, we found 1 warning sign for Atlassian and we think they deserve your attention.
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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.
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