Is It Too Late To Consider Buying Guidewire Software, Inc. (NYSE:GWRE)?

Guidewire Software, Inc. (NYSE:GWRE), is not the largest company out there, but it saw a decent share price growth in the teens level on the NYSE over the last few months. With many analysts covering the mid-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 take a look at Guidewire Software’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for Guidewire Software

What's the opportunity in Guidewire Software?

Guidewire Software appears to be overvalued by 20% at the moment, based on my discounted cash flow valuation. The stock is currently priced at US$93.55 on the market compared to my intrinsic value of $77.72. This means that the buying opportunity has probably disappeared for now. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Guidewire Software’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 does the future of Guidewire Software look like?

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. Guidewire Software's earnings over the next few years are expected to increase by 61%, 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? GWRE’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe GWRE should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on GWRE for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for GWRE, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about Guidewire Software as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 2 warning signs for Guidewire Software you should be aware of.

If you are no longer interested in Guidewire Software, 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.