Gentex Corporation (NASDAQ:GNTX), 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$35.19 and falling to the lows of US$28.39. 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 Gentex's current trading price of US$29.32 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let's take a look at Gentex's outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What Is Gentex Worth?
According to our 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. 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 16.47x is currently trading slightly below its industry peers' ratio of 19.14x, which means if you buy Gentex today, you'd be paying a reasonable price for it. And if you believe that Gentex 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 Gentex'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 Gentex?
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. With profit expected to grow by 27% over the next couple of years, the future seems bright for Gentex. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? It seems like the market has already priced in GNTX'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 track record of its management team. Have these factors changed since the last time you looked at GNTX? 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 GNTX, 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 GNTX, 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.
Diving deeper into the forecasts for Gentex mentioned earlier will help you understand how analysts view the stock going forward. So feel free to check out our free graph representing analyst forecasts.
If you are no longer interested in Gentex, 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.
