Infinera Corporation (NASDAQ:INFN), a communications company based in United States, saw significant share price volatility over the past couple of months on the NasdaqGS, rising to the highs of $12.1 and falling to the lows of $8.77. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Infinera’s current trading price of $9.55 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 Infinera’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. View out our latest analysis for Infinera
What is Infinera worth?The stock seems fairly valued at the moment according to my relative valuation model. I’ve used the price-to-book ratio in this instance because there’s not enough visibility to forecast its cash flows, and its earnings doesn’t seem to reflect its true value. The stock’s ratio of 2.15x is currently trading slightly above its industry peers’ ratio of 1.95x, which means if you buy Infinera today, you’d be paying a relatively fair price for it. And if you believe that Infinera should be trading at this level in the long run, there’s only an insignificant downside when the price falls to its real value. Furthermore, Infinera’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.
What kind of growth will Infinera 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 81.38% over the next couple of years, the future seems bright for Infinera. It looks like higher cash flows 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 INFN’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 INFN? 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 INFN, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for INFN, which means it’s worth further examining other factors such as the strength of its balance sheet, 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 Infinera. You can find everything you need to know about Infinera in the latest infographic research report. If you are no longer interested in Infinera, you can use our free platform to see my list of over 50 other stocks with a high growth potential.