ScanSource (SCSC) Could Be 27% Below Fair Value As HPE Tie Up Expands

HPE partnership expansion puts ScanSource stock in focus

ScanSource (SCSC) is back on investors’ radar after announcing an expanded partnership with HPE that now includes HPE Juniper Networking, broadening its networking, cybersecurity and AI-enabled offerings for channel partners.

See our latest analysis for ScanSource.

ScanSource’s latest HPE announcement comes after a period of strong momentum, with a 12.6% 1 month share price return and a 42.5% 3 month share price return, while the 5 year total shareholder return sits at 95.7%.

If this kind of momentum has you looking beyond ScanSource, it could be a good moment to see which other companies are gaining attention through the 51 AI infrastructure stocks

After a strong run that has lifted ScanSource’s 3 month total return to 42.5% and put the stock within roughly 5% of its average analyst price target, the key question is whether there is still a buying opportunity here or if the market is already pricing in future growth.

Most Popular Narrative: 26.6% Undervalued

ScanSource's most followed valuation narrative puts fair value at $71 per share versus a last close of $52.09, framing the current price as a sizeable discount that depends on specific growth and margin expectations.

The bullish analysts are assuming ScanSource's revenue will grow by 4.5% annually over the next 3 years. The bullish analysts assume that profit margins will increase from 2.4% today to 3.1% in 3 years time.

Read the complete narrative.

Curious what would need to occur for ScanSource to reach this higher valuation? The narrative focuses on a tighter share count, steadier cash generation, and richer margins. The exact mix of revenue growth, profitability, and earnings multiples behind that $71 figure might be different from what you expect.

Result: Fair Value of $71 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, this ScanSource narrative could be knocked off course if hardware commoditization squeezes margins or if direct sales by large vendors begin to bypass distributors.

Find out about the key risks to this ScanSource narrative.

Next Steps

If the bullish tone around ScanSource has you interested, it could be worth acting quickly to check the data yourself and stress test the story against your own expectations, especially given that our work highlights 4 key rewards

Looking for more ScanSource style investment ideas?

If ScanSource has sharpened your interest in finding fresh opportunities, do not stop here. The next step is widening your search before the market moves first.

• Hunt for potential mispriced opportunities by checking companies that screen as more attractively valued through the 43 high quality undervalued stocks.
• Strengthen the defensive side of your portfolio by focusing on companies highlighted in the 74 resilient stocks with low risk scores.
• Spot underfollowed opportunities early by scanning the screener containing 19 high quality undiscovered gems before other investors catch on.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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