Yahoo Finance When Should You Buy ScanSource, Inc. (NASDAQ:SCSC)?
While ScanSource, Inc. (NASDAQ:SCSC) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$35.33 and falling to the lows of US$28.63. 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 ScanSource's current trading price of US$29.73 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at ScanSource’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
View our latest analysis for ScanSource
Is ScanSource Still Cheap?
Great news for investors – ScanSource is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 8.08x is currently well-below the industry average of 16.86x, meaning that it is trading at a cheaper price relative to its peers. Although, there may be another chance to buy again in the future. This is because ScanSource’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 does the future of ScanSource look like?
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. 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 relatively muted profit growth of 4.8% expected over the next year, growth doesn’t seem like a key driver for a buy decision for ScanSource, at least in the short term.
What This Means For You
Are you a shareholder? Even though growth is relatively muted, since SCSC is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as financial health to consider, which could explain the current price multiple.
Are you a potential investor? If you’ve been keeping an eye on SCSC for a while, now might be the time to make a leap. Its future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy SCSC. 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 assessment.
If you want to dive deeper into ScanSource, you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 1 warning sign with ScanSource, and understanding it should be part of your investment process.
If you are no longer interested in ScanSource, 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.
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