Guidance is a word that can make or break the earnings report. Despite scoring a much better earnings report recently, shares of Alteryx, Inc. (NYSE:AYX)slumped to levels not seen in over 2 years due to, once again, unfavorable full-year revenue guidance.
A question to answer is whether Alteryx's current trading price of US$70.00 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 Alteryx's outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Q2 Earnings Results
- Q2 Non-GAAP EPS: -US$0.08 (beat by US$0.17)
- GAAP EPS: -US$0.65 (beat by US$0.04)
- Revenue: US$120.1m (beat by US$7.23m)
- Q3 guidance: US$121-124m (consensus US$146.48m)
Sluggish growth doesn’t seem to be favored by the investors as the stock retraced 50% from the yearly high of US$140. Although the second-quarter results looked fine, weak guidance spooked the investors dropping the stock almost 10% instantly.
Low price ain’t attracting only the retail investors, and there are rumors circulating about a possible takeover, according to Betaville Intelligence.
Is Alteryx still cheap?
Alteryx seems trading at a reasonably low price. According to our valuation, the intrinsic value for the stock is $90.48, which is above what the market is valuing the company at the moment.
This indicates a potential opportunity to buy low. What's more interesting is that Alteryx's share price is theoretically quite stable, which could mean two things: firstly, it may take the share price a while to move to its intrinsic value, and secondly, there may be fewer chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market, given its low beta.
Forecasting the Growth
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares.
Buying a great company with a robust outlook at a low price is always a good investment, so let's also look at the company's future expectations. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision.
Although the stock looks cheap, high uncertainty is on the cards for Alteryx, at least in the near future.
However, there are 3 positive factors for the company that should help the potential turnaround:
- High gross margins: Margins exceeding 90% are impressive, even in their industry.
- High total addressable market: With a market potential of over US$50b, Alteryx has plenty of expansion potential.
- Versatile product: Their clients are from multiple industries, from banks or hotels to other software companies. This provides for both expansion potential and downturn resilience.
What this means for you:
Are you a shareholder? Although AYX is currently undervalued, the negative outlook does bring on some uncertainty, which equates to higher risk. We recommend you consider whether you want to increase your portfolio exposure to AYX 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 AYX for some time but are hesitant about making the leap, I recommend you dig deeper 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.
So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, we've discovered 3 warning signs that you should run your eye over to get a better picture of Alteryx.
If you are no longer interested in Alteryx, you can use our free platform to see our list of over 50 other stocks with high growth potential.
Valuation is complex, but we're helping make it simple.
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Simply Wall St analyst Stjepan Kalinic and Simply Wall St have no position in any of the companies mentioned. This article 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.
Stjepan is a writer and an analyst covering equity markets. As a former multi-asset analyst, he prefers to look beyond the surface and uncover ideas that might not be on retail investors' radar. You can find his research all over the internet, including Simply Wall St News, Yahoo Finance, Benzinga, Vincent, and Barron's.
Alteryx, Inc. operates in analytic process automation business in the Asia-Pacific, Europe, the Middle East, Africa, Latin America, and internationally.
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Undervalued with imperfect balance sheet.