Is Now An Opportune Moment To Examine Zscaler, Inc. (NASDAQ:ZS)?

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Let’s talk about the popular Zscaler, Inc. (NASDAQ:ZS). The company’s shares led the NASDAQGS gainers with a relatively large price hike in the past couple of weeks. As a large-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 the stock still be trading at a relatively cheap price? Let’s take a look at Zscaler’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for Zscaler

What’s the opportunity in Zscaler?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 5.0% below my intrinsic value, which means if you buy Zscaler today, you’d be paying a fair price for it. And if you believe that the stock is really worth $360.63, then there isn’t much room for the share price grow beyond what it’s currently trading. What’s more, Zscaler’s share price may be more stable over time (relative to the market), as indicated by its low beta.

What does the future of Zscaler look like?

earnings-and-revenue-growth

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 matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a negative profit growth of -11% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Zscaler. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? ZS seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on ZS for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on ZS should the price fluctuate below its true value.

Keep in mind, when it comes to analysing a stock it’s worth noting the risks involved. Every company has risks, and we’ve spotted 4 warning signs for Zscaler you should know about.

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

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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