Polaris Inc. (NYSE:PII), 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$137 and falling to the lows of US$97.16. 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 Polaris' current trading price of US$98.17 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 Polaris'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 Polaris
What Is Polaris Worth?
Good news, investors! Polaris is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. I've used the price-to-earnings ratio in this instance because there's not enough visibility to forecast its cash flows. The stock's ratio of 8.77x is currently well-below the industry average of 14.3x, meaning that it is trading at a cheaper price relative to its peers. What's more interesting is that, Polaris's share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. 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 does the future of Polaris look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let's also take a look at the company's future expectations. However, with a negative profit growth of -6.3% expected next year, near-term growth certainly doesn't appear to be a driver for a buy decision for Polaris. This certainty tips the risk-return scale towards higher risk.
What This Means For You
Are you a shareholder? Although PII is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to PII, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you've been keeping an eye on PII for a while, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Our analysis shows 3 warning signs for Polaris (1 is a bit unpleasant!) and we strongly recommend you look at these before investing.
If you are no longer interested in Polaris, 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.