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Is RingCentral, Inc. (NYSE:RNG) Potentially Undervalued?

Today we're going to take a look at the well-established RingCentral, Inc. (NYSE:RNG). The company's stock received a lot of attention from a substantial price increase on the NYSE over the last few months. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Today I will analyse the most recent data on RingCentral’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for RingCentral

Is RingCentral still cheap?

The stock is currently trading at US$166 on the share market, which means it is overvalued by 26% compared to my intrinsic value of $131.84. This means that the buying opportunity has probably disappeared for now. In addition to this, it seems like RingCentral’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

What does the future of RingCentral look like?

NYSE:RNG Past and Future Earnings, December 17th 2019
NYSE:RNG Past and Future Earnings, December 17th 2019

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. Though in the case of RingCentral, it is expected to deliver a highly negative earnings growth in the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What this means for you:

Are you a shareholder? If you believe RNG is currently trading above its value, selling high and buying it back up again when its price falls towards its real value can be profitable. Given the uncertainty from negative growth in the future, this could be the right time to reduce your total portfolio risk. But before you make this decision, take a look at whether its fundamentals have changed.

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Are you a potential investor? If you’ve been keeping tabs on RNG for some time, now may not be the best time to enter into the stock. Its price has risen beyond its true value, on top of a negative future outlook. However, there are also other important factors which we haven’t considered today, such as the track record of its management. Should the price fall in the future, will you be well-informed enough to buy?

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on RingCentral. You can find everything you need to know about RingCentral in the latest infographic research report. If you are no longer interested in RingCentral, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.