Box, Inc. (NYSE:BOX), 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$30.00 at one point, and dropping to the lows of US$24.93. 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 Box's current trading price of US$26.27 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 Box's outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What's The Opportunity In Box?
According to our 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. We've used the price-to-earnings ratio in this instance because there's not enough visibility to forecast its cash flows. The stock's ratio of 38.25x is currently trading slightly below its industry peers' ratio of 41.1x, which means if you buy Box today, you'd be paying a reasonable price for it. And if you believe Box should be trading in this range, then there isn't much room for the share price to grow beyond the levels of other industry peers over the long-term. Furthermore, it seems like Box's share price is quite stable, which means there may be less chances to buy low in the future now that it's priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.
What kind of growth will Box 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. However, with a negative profit growth of -6.2% expected over the next couple of years, near-term growth certainly doesn't appear to be a driver for a buy decision for Box. This certainty tips the risk-return scale towards higher risk.
What This Means For You
Are you a shareholder? Currently, BOX appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on BOX, take a look at whether its fundamentals have changed.
Are you a potential investor? If you've been keeping tabs on BOX for a while, now may not be the most advantageous time to buy, given it is trading around industry price multiples. This means there's less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven't considered today, which can help gel your views on BOX should the price fluctuate below the industry PE ratio.
If you want to dive deeper into Box, you'd also look into what risks it is currently facing. While conducting our analysis, we found that Box has 1 warning sign and it would be unwise to ignore it.
If you are no longer interested in Box, 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.