While ScanSource, Inc. (NASDAQ:SCSC) might not have the largest market cap around , it saw a decent share price growth of 17% on the NASDAQGS over the last few months. The recent share price gains has brought the company back closer to its yearly peak. As a small cap stock, which tends to lack high analyst coverage, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Today we will analyse the most recent data on ScanSource's outlook and valuation to see if the opportunity still exists.

What's The Opportunity In ScanSource?

The stock seems fairly valued at the moment according to our valuation model. It's trading around 8.64% above our intrinsic value, which means if you buy ScanSource today, you'd be paying a relatively reasonable price for it. And if you believe the company's true value is $43.15, there's only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy 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 kind of growth will ScanSource generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. However, with a relatively muted profit growth of 3.6% expected over the next couple of years, 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? It seems like the market has already priced in SCSC's future outlook, with shares trading around its fair value. However, there are also other important factors which we haven't considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you've been keeping tabs on SCSC, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook means it's worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. At Simply Wall St, we found 1 warning sign for ScanSource and we think they deserve your attention.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com