Today we're going to take a look at the well-established Ubiquiti Inc. (NYSE:UI). The company's stock received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$303 at one point, and dropping to the lows of US$262. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Ubiquiti's current trading price of US$268 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Ubiquiti’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Ubiquiti

According to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. 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 46.47x is currently well-above the industry average of 25.91x, meaning that it is trading at a more expensive price relative to its peers. But, is there another opportunity to buy low in the future? Given that Ubiquiti’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 58% over the next year, the near-term future seems bright for Ubiquiti. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

Are you a shareholder? UI’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe UI should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on UI for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for UI, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. When we did our research, we found 4 warning signs for Ubiquiti (3 are a bit unpleasant!) that we believe deserve your full attention.

If you are no longer interested in Ubiquiti, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

What are the risks and opportunities for Ubiquiti?

NYSE:UI

Ubiquiti

Ubiquiti Inc. develops networking technology for service providers, enterprises, and consumers.

Rewards

Earnings are forecast to grow 43.6% per year

Risks

Debt is not well covered by operating cash flow

High level of non-cash earnings

Negative shareholders equity

Profit margins (19.4%) are lower than last year (29.2%)

Share Price

Market Cap

1Y Return

Further research onUbiquiti

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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.