Coupa Software Incorporated (NASDAQ: COUP), an information technology firm with a market capitalization of $3.6 billion, saw its share price increase by 22.9% 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 Vince’s outlook and value based on its most recent financial data to see if there are any catalysts for a price change.
Is Vince Still Cheap?
According to my valuation models, the stock is currently overvalued by approximately -34.4%, trading at $62.97 compared to its intrinsic value of $41.31. Not the best news for investors looking to buy!
|Analysis||Model Fair Value||Upside (Downside)|
|10-yr DCF Revenue Exit||$40.21||-36.1%|
|5-yr DCF Revenue Exit||$49.31||-21.7%|
|Peer Revenue Multiples||$34.41||-45.4%|
Click on any of the analyses above to view the latest model with real-time data.
However, will there be another opportunity to buy low in the future? Given that Vince’s stock is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) could mean the price can sink lower, giving investors another chance to buy in the future. This is based on its beta, which is a good indicator for share price volatility.
What Does The Future Of Vince 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.
source: finbox.io data explorer
Vince’s revenue growth is expected to average 21.4% over the next five fiscal years, indicating a solid future ahead. Unless expenses grow at the same level, or higher, this top-line growth should lead to robust cash flows, feeding into a higher share value.
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.
Vince has positioned itself so that double-digit growth appears to be a reasonable assumption for the foreseeable future. However, this growth does not look highly attractive at current trading levels. As such, investors may want to hold off on buying or adding to their COUP position for the time being.
But before making an investment decision, I recommend you continue to research Vince to get a more comprehensive view of the company by looking at:
Risk Metrics: what is Vince’s cash ratio which is used to assess a company’s short-term liquidity. View the company’s cash ratio here.
Valuation Metrics: what is Vince’s free cash flow yield and how does it compare to its publicly traded peers? This metric measures the amount of free cash flow for each dollar of equity (market capitalization). Analyze the free cash flow yield here.
Efficiency Metrics: return on equity is used to measure the return that a firm generates on the book value of common equity. View Vince’s return on equity 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.