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Should You Investigate Vera Bradley, Inc. (NASDAQ:VRA) At US$4.15?

Vera Bradley, Inc. (NASDAQ:VRA), is not the largest company out there, but it saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$6.85 and falling to the lows of US$4.06. 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 Vera Bradley's current trading price of US$4.15 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 Vera Bradley’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 Vera Bradley

What's The Opportunity In Vera Bradley?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 Vera Bradley’s ratio of 10.04x is trading in-line with its industry peers’ ratio, which means if you buy Vera Bradley today, you’d be paying a relatively reasonable price for it. Is there another opportunity to buy low in the future? Since Vera Bradley’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.

Can we expect growth from Vera Bradley?

earnings-and-revenue-growth
earnings-and-revenue-growth

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. In the upcoming year, Vera Bradley's earnings are expected to increase by 24%, 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? It seems like the market has already priced in VRA’s positive outlook, with shares trading around industry price multiples. 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 VRA? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

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Are you a potential investor? If you’ve been keeping an eye on VRA, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for VRA, 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.

So while earnings quality is important, it's equally important to consider the risks facing Vera Bradley at this point in time. In terms of investment risks, we've identified 1 warning sign with Vera Bradley, and understanding it should be part of your investment process.

If you are no longer interested in Vera Bradley, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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