While Powell Industries, Inc. (NASDAQ:POWL) might not have the largest market cap around , it received a lot of attention from a substantial price increase on the NASDAQGS over the last few months. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. As a US$2.0b market-cap stock, it seems odd Powell Industries is not more well-covered by analysts. However, this is not necessarily a bad thing given that there are less eyes on the stock to push it closer to fair value. Is there still an opportunity to buy? Today we will analyse the most recent data on Powell Industries's outlook and valuation to see if the opportunity still exists.
What Is Powell Industries Worth?
The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. In this instance, we've used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock's cash flows. We find that Powell Industries's ratio of 19.99x is trading slightly below its industry peers' ratio of 20.04x, which means if you buy Powell Industries today, you'd be paying a reasonable price for it. And if you believe that Powell Industries should be trading at this level in the long run, then there's not much of an upside to gain over and above other industry peers. In addition to this, it seems like Powell Industries's share price is quite stable, which could mean there may be less chances to buy low in the future now that it's trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.
Can we expect growth from Powell Industries?
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. Though in the case of Powell Industries, it is expected to deliver a relatively unexciting earnings growth of 8.2%, which doesn't help build up its investment thesis. Growth doesn't appear to be a main reason for a buy decision for Powell Industries, at least in the near term.
What This Means For You
Are you a shareholder? It seems like the market has already priced in POWL's growth 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 POWL? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?
Are you a potential investor? If you've been keeping an eye on POWL, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive growth outlook may mean it's worth diving deeper into other factors in order to take advantage of the next price drop.
With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. While conducting our analysis, we found that Powell Industries has 2 warning signs and it would be unwise to ignore them.
If you are no longer interested in Powell Industries, 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.