Let's talk about the popular Zscaler, Inc. (NASDAQ:ZS). The company's shares saw a significant share price rise of over 20% in the past couple of months on the NASDAQGS. With many analysts covering the large-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? Let’s examine Zscaler’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What's the opportunity in Zscaler?
According to my valuation model, Zscaler seems to be fairly priced at around 9.01% above my intrinsic value, which means if you buy Zscaler today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is $192.78, then there isn’t really any room for the share price grow beyond what it’s currently trading. Furthermore, Zscaler’s low beta implies that the stock is less volatile than the wider market.
What kind of growth will Zscaler 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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with a relatively muted profit growth of 6.1% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Zscaler, at least in the short term.
What this means for you:
Are you a shareholder? It seems like the market has already priced in ZS’s future 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 confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping an eye on ZS, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook 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.
In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Case in point: We've spotted 4 warning signs for Zscaler you should be aware of.
If you are no longer interested in Zscaler, 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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