Should You Investigate A10 Networks, Inc. (NYSE:ATEN) At US$14.91?

A10 Networks, Inc. (NYSE:ATEN), is not the largest company out there, but it saw a significant share price rise of 21% in the past couple of months on the NYSE. While good news for shareholders, the company has traded much higher in the past year. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s take a look at A10 Networks’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for A10 Networks

What Is A10 Networks Worth?

Good news, investors! A10 Networks is still a bargain right now according to our price multiple model, which compares the company's price-to-earnings ratio to the industry average. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 25.27x is currently well-below the industry average of 40.38x, meaning that it is trading at a cheaper price relative to its peers. However, given that A10 Networks’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will A10 Networks 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. However, with a negative profit growth of -5.3% expected next year, near-term growth certainly doesn’t appear to be a driver for a buy decision for A10 Networks. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Although ATEN is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to ATEN, 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 an eye on ATEN for a while, but hesitant on making the leap, we recommend you research further into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

So while earnings quality is important, it's equally important to consider the risks facing A10 Networks at this point in time. While conducting our analysis, we found that A10 Networks has 1 warning sign and it would be unwise to ignore this.

If you are no longer interested in A10 Networks, 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.