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Let's talk about the popular Pure Storage, Inc. (NYSE:PSTG). The company's shares led the NYSE gainers with a relatively large price hike in the past couple of weeks. The company is now trading at yearly-high levels following the recent surge in its share price. 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 we will analyse the most recent data on Pure Storage’s outlook and valuation to see if the opportunity still exists.
Check out our latest analysis for Pure Storage
What Is Pure Storage Worth?
Pure Storage appears to be overvalued by 38% at the moment, based on our discounted cash flow valuation. The stock is currently priced at US$70.08 on the market compared to our intrinsic value of $50.85. This means that the opportunity to buy Pure Storage at a good price has disappeared! But, is there another opportunity to buy low in the future? Given that Pure Storage’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 Pure Storage 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. With profit expected to more than double over the next couple of years, the future seems bright for Pure Storage. 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 PSTG’s positive outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe PSTG 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 PSTG 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 optimistic prospect is encouraging for PSTG, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.