Ambarella, Inc. (NASDAQ:AMBA), 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. While good news for shareholders, the company has traded much higher in the past year. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company's outlook is already priced into the stock. But what if there is still an opportunity to buy? Let's examine Ambarella's valuation and outlook in more detail to determine if there's still a bargain opportunity.
What's The Opportunity In Ambarella?
Good news, investors! Ambarella is still a bargain right now. According to our valuation, the intrinsic value for the stock is $71.66, but it is currently trading at US$49.49 on the share market, meaning that there is still an opportunity to buy now. However, given that Ambarella's share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of Ambarella look like?
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. With profit expected to grow by 49% over the next couple of years, the future seems bright for Ambarella. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? Since AMBA is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.
Are you a potential investor? If you've been keeping an eye on AMBA for a while, now might be the time to make a leap. Its buoyant future outlook isn't fully reflected in the current share price yet, which means it's not too late to buy AMBA. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed buy.
With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. At Simply Wall St, we found 3 warning signs for Ambarella and we think they deserve your attention.
If you are no longer interested in Ambarella, 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.