At US$8.06, Is SolarWinds Corporation (NYSE:SWI) Worth Looking At Closely?

While SolarWinds Corporation (NYSE:SWI) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the NYSE, rising to highs of US$10.71 and falling to the lows of US$7.57. 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 SolarWinds' current trading price of US$8.06 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 SolarWinds’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Our analysis indicates that SWI is potentially overvalued!

What's The Opportunity In SolarWinds?

According to my valuation model, SolarWinds seems to be fairly priced at around 0.86% above my intrinsic value, which means if you buy SolarWinds today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is $7.99, then there isn’t really any room for the share price grow beyond what it’s currently trading. Furthermore, SolarWinds’s low beta implies that the stock is less volatile than the wider market.

What kind of growth will SolarWinds 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. 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. With profit expected to grow by 95% over the next year, the near-term future seems bright for SolarWinds. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? It seems like the market has already priced in SWI’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping an eye on SWI, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you'd like to know more about SolarWinds as a business, it's important to be aware of any risks it's facing. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of SolarWinds.

If you are no longer interested in SolarWinds, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.