Yahoo Finance Why Strattec Security Corporation (NASDAQ:STRT) Could Be Worth Watching
Strattec Security Corporation (NASDAQ:STRT), is not the largest company out there, but it received a lot of attention from a substantial price movement on the NASDAQGM over the last few months, increasing to US$30.40 at one point, and dropping to the lows of US$19.66. 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 Strattec Security's current trading price of US$20.40 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 Strattec Security’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 Strattec Security
What's The Opportunity In Strattec Security?
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 Strattec Security’s ratio of 11.34x is trading slightly below its industry peers’ ratio of 15.45x, which means if you buy Strattec Security today, you’d be paying a decent price for it. And if you believe Strattec Security should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. Is there another opportunity to buy low in the future? Since Strattec Security’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.
What does the future of Strattec Security 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. Though in the case of Strattec Security, it is expected to deliver a negative earnings growth of -12%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What This Means For You
Are you a shareholder? Currently, STRT appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on STRT, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on STRT for a while, now may not be the most advantageous time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on STRT should the price fluctuate below the industry PE ratio.
If you want to dive deeper into Strattec Security, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 2 warning signs for Strattec Security and you'll want to know about these.
If you are no longer interested in Strattec Security, 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.
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