Yahoo Finance At CA$22.79, Is Sierra Wireless Inc (TSE:SW) Worth Looking At Closely?
Sierra Wireless Inc (TSE:SW), which is in the communications business, and is based in Canada, saw a double-digit share price rise of over 10% in the past couple of months on the TSX. As a 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? Today I will analyse the most recent data on Sierra Wireless’s outlook and valuation to see if the opportunity still exists.
View our latest analysis for Sierra Wireless
Is Sierra Wireless still cheap?
Sierra Wireless appears to be overvalued by 20.96% at the moment, based on my discounted cash flow valuation. The stock is currently priced at CA$22.79 on the market compared to my intrinsic value of CA$18.84. This means that the opportunity to buy Sierra Wireless at a good price has disappeared! If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Sierra Wireless’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 kind of growth will Sierra Wireless 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. With revenues expected to grow by a double-digit 20% over the next couple of years, the outlook is positive for Sierra Wireless. If the level of expenses is able to be maintained, 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? SW’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe SW should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. 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 an eye on SW for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for SW, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Sierra Wireless. You can find everything you need to know about Sierra Wireless in the latest infographic research report. If you are no longer interested in Sierra Wireless, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
