Insight Enterprises, Inc. (NASDAQ:NSIT), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$160 at one point, and dropping to the lows of US$139. 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 Insight Enterprises' current trading price of US$143 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 Insight Enterprises'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 Insight Enterprises
What's The Opportunity In Insight Enterprises?
According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 Insight Enterprises's ratio of 18.97x is trading in-line with its industry peers' ratio, which means if you buy Insight Enterprises today, you'd be paying a relatively sensible price for it. Is there another opportunity to buy low in the future? Since Insight Enterprises's share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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 Insight Enterprises generate?
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. Insight Enterprises' earnings over the next few years are expected to increase by 64%, 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 already priced in NSIT's positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven't considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at NSIT? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?
Are you a potential investor? If you've been keeping an eye on NSIT, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for NSIT, 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.
So while earnings quality is important, it's equally important to consider the risks facing Insight Enterprises at this point in time. While conducting our analysis, we found that Insight Enterprises has 1 warning sign and it would be unwise to ignore it.
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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.