Extreme Networks (EXTR) shares are in focus after Cellhub, a healthcare technology aggregator and Primary Agent for T-Mobile, agreed to use the company’s AI-powered networking in its Hospitals Without Walls connectivity program.

The recent Cellhub agreement comes as Extreme Networks trades at US$14.83, with a 7 day share price return of 5.70%, a 90 day share price return of 11.67%, and a 3 year total shareholder return of 17.70%.

If you are interested in how other AI focused names are trading around similar themes, this is a good moment to check out 34 AI infrastructure stocks

With Extreme Networks trading at US$14.83 and both intrinsic value models and analyst targets indicating a sizeable discount, the key question is whether this AI networking player is still mispriced or if the market already anticipates the expected growth.

Preferred Multiple of 1.6x Price to Sales: Is it justified?

At a last close of $14.83, Extreme Networks is flagged as trading at good value compared with both peers and the wider US Communications industry, based on its current P/S ratio of 1.6x.

The P/S multiple compares a company’s market value with its annual revenue. This can be a useful gauge for businesses where earnings are still normalising or have been affected by one off items. For Extreme Networks, this lens is particularly relevant given recent profitability, forecast earnings growth of 40.23% per year, and revenue of $1.22b.

Relative comparisons look favorable here. The stock’s 1.6x P/S sits below the US Communications industry average of 1.9x and also below the peer group average of 3.3x. This suggests the market is assigning a lower revenue multiple than many similar names. In addition, the estimated fair P/S ratio of 4x indicates a level the market could move towards if sentiment and fundamentals were to realign more closely with that fair value benchmark.

Result: Price-to-Sales of 1.6x (UNDERVALUED)

However, current results still look finely balanced, with net income at US$9.14m on US$1.22b revenue and a 3-year total shareholder return decline of 18%.

Another View: What The DCF Model Says

While the current 1.6x P/S suggests Extreme Networks trades at a discount to peers and the wider US Communications group, our DCF model goes even further. It indicates a fair value of $37.98 per share versus the current $14.83 price, implying the stock is undervalued using projected cash flows.

This kind of gap can point to opportunity if cash flow forecasts prove realistic, or to risk if the assumptions are too optimistic. The key question is which story you think is closer to reality: the revenue multiple or the cash flow view.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Extreme Networks for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 47 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

With mixed signals from valuation and recent returns, sentiment is clearly split. It makes sense to move quickly and weigh the full picture, including 5 key rewards and 1 important warning sign

Looking for more investment ideas?

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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.