Should You Think About Buying Harmonic Inc. (NASDAQ:HLIT) Now?

While Harmonic Inc. (NASDAQ:HLIT) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase on the NASDAQGS over the last few months. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s take a look at Harmonic’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Harmonic

What's the opportunity in Harmonic?

Good news, investors! Harmonic is still a bargain right now. According to my valuation, the intrinsic value for the stock is $8.15, 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, Harmonic’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 less 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.

What kind of growth will Harmonic generate?

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 cheap price is always a good investment, so let’s also take a look at the company's future expectations. Though in the case of Harmonic, it is expected to deliver a negative earnings growth of -9.8%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What this means for you:

Are you a shareholder? Although HLIT is currently undervalued, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to HLIT, 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 HLIT for a while, but hesitant on 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 while earnings quality is important, it's equally important to consider the risks facing Harmonic at this point in time. At Simply Wall St, we found 2 warning signs for Harmonic and we think they deserve your attention.

If you are no longer interested in Harmonic, 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. 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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