Patterson Companies, Inc. (NASDAQ:PDCO), might not be a large cap stock, but it saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$30.36 and falling to the lows of US$26.41. 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 Patterson Companies' current trading price of US$26.41 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 Patterson Companies's outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What's The Opportunity In Patterson Companies?
Great news for investors – Patterson Companies is still trading at a fairly cheap price according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. We'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 12.21x is currently well-below the industry average of 25.94x, meaning that it is trading at a cheaper price relative to its peers. What's more interesting is that, Patterson Companies'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 Patterson Companies look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. However, with a relatively muted profit growth of 5.4% expected over the next couple of years, growth doesn't seem like a key driver for a buy decision for Patterson Companies, at least in the short term.
What This Means For You
Are you a shareholder? Even though growth is relatively muted, since PDCO is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as financial health to consider, which could explain the current price multiple.
Are you a potential investor? If you've been keeping an eye on PDCO for a while, now might be the time to make a leap. Its future profit outlook isn't fully reflected in the current share price yet, which means it's not too late to buy PDCO. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed assessment.
If you want to dive deeper into Patterson Companies, you'd also look into what risks it is currently facing. Case in point: We've spotted 3 warning signs for Patterson Companies you should be mindful of and 2 of them are a bit concerning.
If you are no longer interested in Patterson Companies, 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.