Insight Enterprises, Inc. (NASDAQ: NSIT), an information technology firm with a market capitalization of $1.6 billion, saw its share price increase by 27.2% over the last month. As a small-cap stock, hardly covered by analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. However, could shares still be trading at a relatively cheap price? Let’s take a look at Insight’s outlook and value based on its most recent financial data to see if there are any catalysts for a price change.
Is Insight Still Cheap?
Good news, value investors! Insight is still a bargain right now. According to the valuation below, the intrinsic value for the stock is $63.49, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low.
|Analysis||Model Fair Value||Upside (Downside)|
|10-yr DCF EBITDA Exit||$73.70||60.8%|
|Peer EBITDA Multiples||$61.74||34.7%|
|10-yr DCF Growth Exit||$65.03||41.9%|
|5-yr DCF Growth Exit||$63.71||39.0%|
|Peer P/E Multiples||$55.59||21.3%|
|Earnings Power Value||$61.19||33.5%|
Click on any of the analyses above to view the latest model with real-time data.
Insight’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta of 0.80. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
What Does The Future Of Insight Look Like?
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.
w source: finbox.io data explorer
With net income expected to grow at an average rate of 15.8% over the next couple years, the future certainly appears bright for Insight. It looks like higher cash flows are in the cards for shareholders, which should feed into a higher stock valuation.
How This Impacts You
Many investors separate stocks into value and growth categories based on quantitative metrics. However, one of the most famous investors in the world views this as foolish. In Warren Buffett’s 1992 letter to Berkshire Hathaway shareholders, Buffett touches upon a subject at odds with much of the investment industry:
“Most analysts feel they must choose between two approaches customarily thought to be in opposition: ‘value’ and ‘growth.’ Indeed, many investment professionals see any mixing of the two terms as a form of intellectual cross-dressing. We view that as fuzzy thinking… In our opinion, the two approaches are joined at the hip: Growth is always a component in the calculation of value.”
While investors tend to categorize stocks into value and growth, some of the most successful investors view growth as simply one component of a company’s value.
Insight’s optimistic future growth does not appear to have been fully factored into the current share price with the stock still trading below its intrinsic value. Therefore, it may be a good time to purchase shares or increase your position in the company.
But before making an investment decision, I recommend you continue to research Insight to get a more comprehensive view of the company by looking at:
Risk Metrics: what is Insight’s asset efficiency? This ratio measures the amount of cash flow that a company generates from its assets. View the company’s asset efficiency here.
Valuation Metrics: what is Insight’s EBITDA less CapEx multiple and how does it compare to its peers? This is a helpful multiple to analyze when comparing capital intensive businesses. View the company’s EBITDA less CapEx multiple here.
Efficiency Metrics: is management becoming more or less efficient in creating value for the firm? Find out by analyzing the company’s return on invested capital 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.