While ACI Worldwide, Inc. (NASDAQ:ACIW) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase on the NASDAQGS over the last few months. 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. However, what if the stock is still a bargain? Let’s take a look at ACI Worldwide’s outlook and value based on the most recent financial data to see if the opportunity still exists.
What is ACI Worldwide worth?
ACI Worldwide appears to be overvalued by 35% at the moment, based on my discounted cash flow valuation. The stock is currently priced at US$30.50 on the market compared to my intrinsic value of $22.67. Not the best news for investors looking to buy! But, is there another opportunity to buy low in the future? Given that ACI Worldwide’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 ACI Worldwide 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. ACI Worldwide’s earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? ACIW’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe ACIW 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 tabs on ACIW for some time, 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 positive outlook is encouraging for ACIW, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
If you'd like to know more about ACI Worldwide as a business, it's important to be aware of any risks it's facing. For example, we've found that ACI Worldwide has 2 warning signs (1 doesn't sit too well with us!) that deserve your attention before going any further with your analysis.
If you are no longer interested in ACI Worldwide, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
This article by Simply Wall St is general in nature. 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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