Mitek Systems Inc (NASDAQ:MITK), a software company based in United States, saw significant share price volatility over the past couple of months on the NasdaqCM, rising to the highs of $10.5 and falling to the lows of $8.53. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether MITK’s current trading price of $8.75 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 MITK’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 Mitek Systems
What is MITK worth?
According to my valuation model, the stock is currently overvalued by about 29%, trading at $8.75 compared to my intrinsic value of $6.76. This means that the buying opportunity has probably disappeared for now. In addition to this, it seems like MITK’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 MITK’s stock is less volatile than the wider market given its low beta.
What does the future of MITK look like?
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 more than double over the next couple of years, the future seems bright for MITK. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? MITK’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe MITK 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 MITK 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 MITK, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.