The Simply Good Foods Company (NASDAQ:SMPL), is not the largest company out there, but it received a lot of attention from a substantial price movement on the NASDAQCM over the last few months, increasing to US$41.55 at one point, and dropping to the lows of US$29.40. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Simply Good Foods' current trading price of US$29.40 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let's take a look at Simply Good Foods's outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Simply Good Foods

What Is Simply Good Foods Worth?

According to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. In this instance, I've used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock's cash flows. I find that Simply Good Foods's ratio of 30.52x is above its peer average of 18.94x, which suggests the stock is trading at a higher price compared to the Food industry. In addition to this, it seems like Simply Good Foods's share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will Simply Good Foods generate?

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. With profit expected to grow by 95% over the next couple of years, the future seems bright for Simply Good Foods. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? It seems like the market has well and truly priced in SMPL's positive outlook, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe SMPL should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio 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 SMPL for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for SMPL, which means it's worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into Simply Good Foods, you'd also look into what risks it is currently facing. Case in point: We've spotted 1 warning sign for Simply Good Foods you should be aware of.

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

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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.