Shares of Pandora Media Inc (NYSE: P) are receiving a lot of investor interest as of late due to the stock’s 56.1% increase over the last month. Shareholders are now asking themselves whether the company’s current stock price is reflective of its true value or if shares have even further upside from here.
Let’s take a look at Pandora’s value and outlook based on its most recent financial data to see if there are any catalysts for a price change.
What Is Pandora Worth?
According to our 5 valuation models, Pandora seems to be fairly priced in the market at 10.4% above its intrinsic value. This means if you were to buy Pandora today, you’d be paying a reasonable price for it. If you believe that the stock is really worth $6.45, then there isn’t much room for the share price to appreciate beyond where it’s currently trading.
|Analysis||Model Fair Value||Upside (Downside)|
|10-yr DCF EBITDA Exit||$6.58||-8.6%|
|5-yr DCF EBITDA Exit||$7.00||-2.8%|
|10-yr DCF Growth Exit||$5.93||-17.6%|
|5-yr DCF Growth Exit||$6.33||-12.1%|
|Earnings Power Value||$6.41||-10.9%|
Click on any of the analyses above to view the latest model with real-time data.
In addition, it seems like Pandora’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its beta of -0.98.
How Much Growth Will Pandora 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 Pandora’s relatively muted top-line growth of 9.3% 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.
Pandora’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 Pandora, 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 Pandora by taking a look at the following:
Efficiency Metrics: fixed asset turnover is calculated by dividing revenue by average fixed assets. View Pandora’s fixed asset turnover here.
Risk Metrics: how much interest coverage does Pandora have? This is a ratio used to assess a firm’s ability to pay interest expenses based on operating profits (EBIT). View the company’s interest coverage here.
Valuation Metrics: what is Pandora’s short ratio and how does it compare to its publicly traded peers? It represents the percentage of total shares outstanding that is being shorted. View the short ratio here.
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.