Gates Industrial Corporation plc (NYSE:GTES), might not be a large cap stock, but it saw significant share price movement during recent months on the NYSE, rising to highs of US$13.17 and falling to the lows of US$10.50. 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 Gates Industrial's current trading price of US$11.38 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 Gates Industrial's outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Gates Industrial

What Is Gates Industrial Worth?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. 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 Gates Industrial's ratio of 14.77x is trading slightly below its industry peers' ratio of 19.41x, which means if you buy Gates Industrial today, you'd be paying a reasonable price for it. And if you believe Gates Industrial should be trading in this range, then there isn't much room for the share price to grow beyond the levels of other industry peers over the long-term. Is there another opportunity to buy low in the future? Since Gates Industrial's share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What kind of growth will Gates Industrial 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. Though in the case of Gates Industrial, it is expected to deliver a negative earnings growth of -5.0%, which doesn't help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? Currently, GTES appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on GTES, take a look at whether its fundamentals have changed.

Are you a potential investor? If you've been keeping an eye on GTES for a while, now may not be the most optimal time to buy, given it is trading around industry price multiples. This means there's less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven't considered today, which can help gel your views on GTES should the price fluctuate below the industry PE ratio.

If you want to dive deeper into Gates Industrial, you'd also look into what risks it is currently facing. Case in point: We've spotted 2 warning signs for Gates Industrial you should be aware of.

If you are no longer interested in Gates Industrial, 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.