Cambium Networks Corporation (NASDAQ:CMBM), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the NASDAQGM over the last few months, increasing to US$22.60 at one point, and dropping to the lows of US$17.97. Some share price movements can give investors a better opportunity to enter the stock, and potentially buy at a lower price. A question to answer is whether Cambium Networks’ current trading price of US$17.97 reflects 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 Cambium Networks’ 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 Cambium Networks
Is Cambium Networks Still Cheap?
According to my price multiple model, which makes a comparison between the company’s price-to-earnings ratio and the industry average, the stock price seems to be justified. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 24.32x is currently trading slightly below its industry peers’ ratio of 25.69x, which means if you buy Cambium Networks today, you’d be paying a decent price for it. And if you believe Cambium Networks should be trading within this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long term. Furthermore, it seems like Cambium Networks’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.
What kind of growth will Cambium Networks 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. Although value investors would argue that it’s the intrinsic value relative to the price that matters most, a more compelling investment theses would be high growth potential at a cheap price. Cambium Networks’ earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? It seems like the market has already been priced in CMBM’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at CMBM? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?
Are you a potential investor? If you’ve been keeping tabs on CMBM, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for CMBM, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
If you want to dive deeper into Cambium Networks, you’d also look into what risks it is currently facing. Be aware that Cambium Networks is showing 3 warning signs in our investment analysis and 1 of those is a bit concerning…
If you are no longer interested in Cambium Networks, you can use our free platform to view our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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