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Varex Imaging Corporation (NASDAQ:VREX), 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$29.69 and falling to the lows of US$25.84. 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 Varex Imaging's current trading price of US$27.05 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 Varex Imaging’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 Varex Imaging?
According to my valuation model, Varex Imaging seems to be fairly priced at around 16% below my intrinsic value, which means if you buy Varex Imaging today, you’d be paying a fair price for it. And if you believe that the stock is really worth $32.15, then there’s not much of an upside to gain from mispricing. In addition to this, Varex Imaging has a low beta, which suggests its share price is less volatile than the wider market.
What does the future of Varex Imaging look like?
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. Varex Imaging's revenue growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. Unless expenses grow at the same level, or higher, this top-line growth should lead to robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has already priced in VREX’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping an eye on VREX, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
If you'd like to know more about Varex Imaging as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 1 warning sign for Varex Imaging you should know about.
If you are no longer interested in Varex Imaging, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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.
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