Is Now The Time To Look At Buying Cheetah Mobile Inc. (NYSE:CMCM)?

While Cheetah Mobile Inc. (NYSE:CMCM) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$2.37 at one point, and dropping to the lows of US$1.63. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Cheetah Mobile's current trading price of US$1.63 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Cheetah Mobile’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Cheetah Mobile

Is Cheetah Mobile still cheap?

Good news, investors! Cheetah Mobile is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. I’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 3.82x is currently well-below the industry average of 57.24x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, Cheetah Mobile’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from Cheetah Mobile?

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 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. It seems like high uncertainty is on the cards for Cheetah Mobile, at least in the near future.

What this means for you:

Are you a shareholder? Although CMCM is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to CMCM, 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 CMCM for a while, but hesitant on making the leap, I 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.

If you'd like to know more about Cheetah Mobile as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 4 warning signs for Cheetah Mobile you should be mindful of and 1 of these can't be ignored.

If you are no longer interested in Cheetah Mobile, 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.
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