Is There Now An Opportunity In WidePoint Corporation (NYSEMKT:WYY)?

WidePoint Corporation (NYSEMKT:WYY), might not be a large cap stock, but it led the AMEX gainers with a relatively large price hike in the past couple of weeks. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s take a look at WidePoint’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for WidePoint

Is WidePoint still cheap?

WidePoint appears to be expensive according to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that WidePoint’s ratio of 47.76x is above its peer average of 36.69x, which suggests the stock is trading at a higher price compared to the IT industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that WidePoint’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.

Can we expect growth from WidePoint?

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. In the upcoming year, WidePoint's earnings are expected to increase by 48%, 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? It seems like the market has well and truly priced in WYY’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe WYY should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio 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 an eye on WYY for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for WYY, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into WidePoint, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 2 warning signs for WidePoint and you'll want to know about these.

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This article by Simply Wall St is general in nature. 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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