When Should You Buy Lumentum Holdings Inc. (NASDAQ:LITE)?

By
Simply Wall St
Published
January 24, 2022
NasdaqGS:LITE
Source: Shutterstock

Lumentum Holdings Inc. (NASDAQ:LITE), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the NASDAQGS over the last few months. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Lumentum Holdings’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Lumentum Holdings

What is Lumentum Holdings worth?

Good news, investors! Lumentum Holdings is still a bargain right now. My valuation model shows that the intrinsic value for the stock is $160.55, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. Lumentum Holdings’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

What does the future of Lumentum Holdings look like?

earnings-and-revenue-growth
NasdaqGS:LITE Earnings and Revenue Growth January 24th 2022

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 Lumentum Holdings, it is expected to deliver a highly negative earnings growth in the next few years, 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 LITE is currently undervalued, the negative outlook does bring on some uncertainty, which equates to higher risk. I recommend you think about whether you want to increase your portfolio exposure to LITE, 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 tabs on LITE for some time, but hesitant on making the leap, I recommend you research further 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.

If you'd like to know more about Lumentum Holdings as a business, it's important to be aware of any risks it's facing. While conducting our analysis, we found that Lumentum Holdings has 1 warning sign and it would be unwise to ignore it.

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

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