Photronics, Inc. (NASDAQ:PLAB), is not the largest company out there, but it received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$33.84 at one point, and dropping to the lows of US$26.77. 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 Photronics' current trading price of US$27.29 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let's take a look at Photronics's outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is Photronics Still Cheap?
Great news for investors – Photronics 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 12.56x is currently well-below the industry average of 28.35x, meaning that it is trading at a cheaper price relative to its peers. Although, there may be another chance to buy again in the future. This is because Photronics's beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company's shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will Photronics 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. 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. In the upcoming year, Photronics' earnings are expected to increase by 49%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? Since PLAB is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With an optimistic profit outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.
Are you a potential investor? If you've been keeping an eye on PLAB for a while, now might be the time to enter the stock. Its prosperous future profit outlook isn't fully reflected in the current share price yet, which means it's not too late to buy PLAB. 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 investment decision.
Diving deeper into the forecasts for Photronics mentioned earlier will help you understand how analysts view the stock going forward. At Simply Wall St, we have the analysts estimates which you can view by clicking here.
If you are no longer interested in Photronics, 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.