SDL plc (LON:SDL), which is in the software business, and is based in United Kingdom, received a lot of attention from a substantial price movement on the LSE over the last few months, increasing to £5.08 at one point, and dropping to the lows of £4.4. 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 SDL’s current trading price of £4.78 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 SDL’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for SDL

What is SDL worth?

The stock is currently trading at UK£4.78 on the share market, which means it is overvalued by 24.13% compared to my intrinsic value of £3.85. Not the best news for investors looking to buy! In addition to this, it seems like SDL’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 the stock is less volatile than the wider market given its low beta.

Can we expect growth from SDL?

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 grow by 54% over the next couple of years, the future seems bright for SDL. 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 SDL’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 SDL 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 SDL 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 SDL, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.