CommVault Systems, Inc. (NASDAQ: CVLT), an information technology firm with a market capitalization of $3.0 billion, saw its share price increase by 20.5% over the last month. 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, could shares still be trading at a relatively cheap price? Let’s take a look at CommVault’s outlook and value based on its most recent financial data to see if there are any catalysts for a price change.
What Is CommVault Worth?
According to our 9 valuation models, CommVault seems to be fairly priced in the market at 10.1% above its intrinsic value. This means if you were to buy CommVault today, you’d be paying a reasonable price for it. If you believe that the stock is really worth $59.99, then there isn’t a huge amount of room for the share price to appreciate beyond where it’s currently trading.
|Analysis||Model Fair Value||Upside (Downside)|
|10-yr DCF Revenue Exit||$67.41||1.1%|
|5-yr DCF Revenue Exit||$73.76||10.6%|
|Peer Revenue Multiples||$74.06||11.0%|
|10-yr DCF EBITDA Exit||$64.94||-2.6%|
|5-yr DCF EBITDA Exit||$70.13||5.1%|
|Peer EBITDA Multiples||$34.82||-47.8%|
|10-yr DCF Growth Exit||$58.87||-11.7%|
|5-yr DCF Growth Exit||$61.20||-8.2%|
|Earnings Power Value||$34.71||-48.0%|
Click on any of the analyses above to view the latest model with real-time data.
Although, there may be an opportunity to buy in the future. This is because CommVault’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.
How Much Growth Will CommVault Generate?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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.
source: finbox.io data explorer
With CommVault’s relatively muted top-line growth of 9.6% expected over the next five years on average, growth doesn’t seem like a key catalyst for a buying decision, at least in the short to medium-term.
While many investors tend to categorize stocks as either value or growth plays, the most successful investors view growth in conjunction with a company’s value. Take legendary investor Peter Lynch for example, who is widely known for popularizing the term growth at a reasonable price (GARP).
GARP is a strategy that combines aspects of both growth and value investing techniques by finding high growth companies that don’t trade at overly high valuations. In the application of this strategy, Lynch achieved 29% annualized returns as the manager of Fidelity’s Magellan Fund from 1977 to 1990. Needless to say the importance of analyzing a company’s fair value in addition to its growth prospects.
CommVault’s future growth is relatively low and the stock appears fairly valued at the moment according to our valuation models. As a shareholder, you may have already conducted your fundamental analysis on the company and the stock’s recent appreciation may have been expected. Therefore, it may be time for investors to take some chips off the table. For prospective investors looking to purchase shares of CommVault, it may be worth holding off until the stock develops a larger margin of safety.
However, if you have not done so already, I highly recommend you complete your research on CommVault by taking a look at the following:
Efficiency Metrics: how much free cash flow does CommVault generate as a percentage of total sales? Has it been increasing or decreasing over time? Review the firm’s free cash flow margin here.
Risk Metrics: what is CommVault’s Altman Z score? It’s a famous formula used to predict the probability that a firm will go into bankruptcy within two years. View the company’s Altman Z score here.
Valuation Metrics: how much upside do shares of CommVault have based on the Ben Graham Formula? Take a look at our Ben Graham Formula data explorer which also compares the company’s upside to its peers.
Author: Matt Hogan
Expertise: Valuation, financial statement analysis
Matt Hogan is also a co-founder of finbox.io. His expertise is in investment decision making. Prior to finbox.io, Matt worked for an investment banking group providing fairness opinions in connection to stock acquisitions. He spent much of his time building valuation models to help clients determine an asset’s fair value. He believes that these same valuation models should be used by all investors before buying or selling a stock.
Matt can be reached at firstname.lastname@example.org.
As of this writing, I did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.