Allegro MicroSystems, Inc. (NASDAQ:ALGM), might not be a large cap stock, but it saw a decent share price growth of 16% on the NASDAQGS over the last few months. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. 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? Today we will analyse the most recent data on Allegro MicroSystems's outlook and valuation to see if the opportunity still exists.
What Is Allegro MicroSystems Worth?
According to our valuation model, the stock is currently overvalued by about 35%, trading at US$29.86 compared to our intrinsic value of $22.17. This means that the opportunity to buy Allegro MicroSystems 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 Allegro MicroSystems'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.
Can we expect growth from Allegro MicroSystems?
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. With profit expected to grow by a double-digit 11% over the next couple of years, the outlook is positive for Allegro MicroSystems. 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? It seems like the market has well and truly priced in ALGM's positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe ALGM 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 ALGM 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 positive outlook is encouraging for ALGM, which means it's worth diving deeper into other factors in order to take advantage of the next price drop.
Since timing is quite important when it comes to individual stock picking, it's worth taking a look at what those latest analysts forecasts are. At Simply Wall St, we have the analysts estimates which you can view by clicking here.
If you are no longer interested in Allegro MicroSystems, 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.