InterDigital, Inc. (NASDAQ:IDCC), which is in the communications business, and is based in United States, saw significant share price movement during recent months on the NASDAQGS, rising to highs of $73.4 and falling to the lows of $64.38. 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 InterDigital’s current trading price of $64.79 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at InterDigital’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What’s the opportunity in InterDigital?The stock is currently trading at US$64.79 on the share market, which means it is overvalued by 46.3% compared to my intrinsic value of $44.29. This means that the opportunity to buy InterDigital at a good price has disappeared! If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since InterDigital’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. 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.
What kind of growth will InterDigital generate?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. InterDigital’s earnings over the next few years are expected to increase by 32%, 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 IDCC’s positive outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe IDCC 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 an eye on IDCC for a while, 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 positive outlook is encouraging for IDCC, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on InterDigital. You can find everything you need to know about InterDigital in the latest infographic research report. If you are no longer interested in InterDigital, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.