Two 59%+ winners, four above 25% in Aug – How this AI model keeps picking winners
In October 2024, InvestingPro’s Fair Value models identified a significant mispricing in LegalZoom.com, Inc. (NASDAQ:LZ) shares, demonstrating the power of sophisticated valuation analysis in uncovering market opportunities. The Fair Value methodology, which combines multiple valuation approaches to determine a stock’s intrinsic value, has proven particularly effective in identifying undervalued stocks. Investors seeking similar opportunities can explore current undervalued stocks on our Most undervalued list.
LegalZoom.com, a leading online platform for legal services and business formation, has established itself as a dominant player in the legal technology sector. When InvestingPro’s models flagged the stock as undervalued at $6.53, the company was showing strong fundamental indicators despite its depressed share price. With revenues of $678.8 million and improving retention rates, the company’s true potential appeared overlooked by the market.
The subsequent performance has strongly validated InvestingPro’s analysis. LegalZoom shares have surged approximately 55% to $9.56, significantly outperforming initial estimates. This appreciation was supported by several positive developments, including the strategic acquisition of Formation Nation, which is expected to generate approximately $60 million in additional revenue and provide significant cross-selling opportunities.
Recent quarterly results have further reinforced the stock’s upward trajectory. The company reported a 30.8% increase in earnings per share, while revenue grew to $690.8 million. JPMorgan’s multiple price target increases and upgrade to Overweight status reflect growing institutional confidence in LegalZoom’s business model and growth prospects.
InvestingPro’s Fair Value analysis succeeded by incorporating multiple valuation methodologies, including discounted cash flow models, comparable company analyses, and analyst consensus targets. This comprehensive approach, combined with consideration of the company’s strong brand awareness and improving business metrics, helped identify the substantial upside potential before the market fully recognized it.
The success of this Fair Value call exemplifies the advantage of having access to sophisticated investment tools and analysis. InvestingPro subscribers benefit from similar actionable insights, including Fair Value analyses, financial health scores, and proprietary valuation metrics across thousands of stocks. As LegalZoom’s case demonstrates, combining fundamental analysis with advanced valuation tools can lead to significant investment opportunities.