Photronics, Inc. (NASDAQ: PLAB), isn’t the biggest company in the business, but it has seen decent growth in its teen-level share price on the NASDAQGS over the past few months. As a small cap stock, which tends to lack high analyst coverage, there is usually more opportunity for bad valuation because there is less activity to bring the stock closer to its fair value. Is there still an opportunity here to buy? Let’s take a closer look at the valuation and outlook for Photronics to determine if there is still an opportunity to trade.
Check out our latest review for Photronics
Is Photronics still cheap?
Good news, investors! Photronics is still a good deal at the moment under my multiple pricing model, which compares the company’s price-to-earnings ratio to the industry average. I used the price / earnings ratio in this case because there is not enough visibility to forecast its cash flow. The stock’s ratio of 23.86x is currently well below the industry average of 33.02x, meaning it is trading at a lower price than its peers. Another thing to keep in mind is that the Photronics share price is quite stable compared to the rest of the market as indicated by its low beta. This means that if you think the current stock price should move towards its industry peers, a low beta might suggest that it is not likely to reach that level anytime soon, and once there is. is, it can be difficult to fall back into an attractive purchase. range again.
What kind of growth will Photronics generate?
Future prospects are an important aspect when considering buying a stock, especially if you are an investor looking to grow your portfolio. While value investors argue that intrinsic value versus price matters most, a more compelling investment thesis would be high growth potential at a cheap price. With expected earnings growing 54% over the next year, the near-term future looks bright for Photronics. It looks like a higher cash flow is expected for the stock, which should fuel a higher valuation of the stock.
What this means for you:
Are you a shareholder? Given that PLAB is currently trading below the industry PE ratio, this might be a great time to increase your holdings of stocks. With a positive earnings outlook on the horizon, it appears that this growth has not yet been fully reflected in the share price. However, there are also other factors such as the capital structure to take into account, which could explain the current price multiple.
Are you a potential investor? If you’ve been keeping your eye on PLAB for a while, maybe now is the time to get into the stock. Its optimistic future earnings outlook is not yet fully reflected in the current share price, which means it is not too late to buy PLAB. But before making any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed assessment.
Diving deeper into the aforementioned Photronics forecast will help you understand how analysts view the stock going forward. Fortunately, you can check out the analysts’ forecasts by clicking here.
If you’re no longer interested in Photronics, you can use our free platform to view our list of over 50 other high growth stocks.
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This Simply Wall St article is general in nature. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative material. Simply Wall St has no position in any of the stocks mentioned.
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