Yahoo Finance Is Now An Opportune Moment To Examine Gartner, Inc. (NYSE:IT)?
Gartner, Inc. (NYSE:IT) received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$353 at one point, and dropping to the lows of US$294. 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 Gartner's current trading price of US$302 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Gartner’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 Gartner
What's The Opportunity In Gartner?
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 Gartner’s ratio of 25.68x is trading slightly above its industry peers’ ratio of 21.79x, which means if you buy Gartner today, you’d be paying a relatively sensible price for it. And if you believe that Gartner should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Although, there may be an opportunity to buy in the future. This is because Gartner’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will Gartner generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 -19% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Gartner. This certainty tips the risk-return scale towards higher risk.
What This Means For You
Are you a shareholder? Currently, IT 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 reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on IT, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on IT 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 crystallize your views on IT should the price fluctuate below the industry PE ratio.
With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For instance, we've identified 3 warning signs for Gartner (1 is a bit unpleasant) you should be familiar with.
If you are no longer interested in Gartner, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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