AppFolio, Inc. (NASDAQ:APPF), might not be a large cap stock, but it saw a significant share price rise of 30% in the past couple of months on the NASDAQGM. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. 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, what if the stock is still a bargain? Today we will analyse the most recent data on AppFolio’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for AppFolio

What's The Opportunity In AppFolio?

According to our valuation model, the stock is currently overvalued by about 28%, trading at US$249 compared to our intrinsic value of $195.11. This means that the buying opportunity has probably disappeared for now. Furthermore, AppFolio’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. 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 kind of growth will AppFolio generate?

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. AppFolio's earnings over the next few years are expected to increase by 35%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? It seems like the market has well and truly priced in APPF’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe APPF should trade below its current price, selling high and buying it back up again when its price falls towards its real value 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 tabs on APPF for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for APPF, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about AppFolio as a business, it's important to be aware of any risks it's facing. While conducting our analysis, we found that AppFolio has 1 warning sign and it would be unwise to ignore this.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.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.