What Is Calix, Inc.'s (NYSE:CALX) Share Price Doing?

Calix, Inc. (NYSE:CALX), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$56.00 at one point, and dropping to the lows of US$42.73. 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 Calix's current trading price of US$42.73 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 Calix’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Calix

What Is Calix Worth?

Calix is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Calix’s ratio of 66.62x is above its peer average of 23.29x, which suggests the stock is trading at a higher price compared to the Communications industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since Calix’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 Calix 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. 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. However, with a negative profit growth of -5.2% expected next year, near-term growth certainly doesn’t appear to be a driver for a buy decision for Calix. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? If you believe CALX is currently trading above its peers, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. Given the risk from a negative growth outlook, this could be the right time to reduce your total portfolio risk. 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 tabs on CALX for some time, now may not be the best time to enter into the stock. The price has climbed past its industry peers, in addition to a risky future outlook. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Should the price fall in the future, will you be well-informed enough to buy?

So while earnings quality is important, it's equally important to consider the risks facing Calix at this point in time. At Simply Wall St, we found 2 warning signs for Calix and we think they deserve your attention.

If you are no longer interested in Calix, 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. 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.