Is it too late to consider buying Northern Technologies International Corporation (NASDAQ: NTIC)?

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Northern Technologies International Corporation (NASDAQ:NTIC), isn’t the biggest company in the market, but it has seen a double-digit share price rise of more than 10% in the past two months on NASDAQGM . As a small-cap stock, barely covered by analysts, there’s usually more opportunity for mispricing because there’s less activity to bring the stock closer to its fair value. Is there still a possibility here to buy? Let’s take a closer look at Northern Technologies International’s valuation and outlook to determine if there is still a bargain opportunity.

Is Northern Technologies International always cheap?

According to my multiple price model, which compares the company’s price-earnings ratio to the industry average, the stock price seems justified. I used the price/earnings ratio in this case because there is not enough visibility to predict its cash flow. The stock ratio of 13.98x is currently trading slightly below its industry peers ratio of 16.1x, which means that if you buy Northern Technologies International today, you will pay a reasonable price for it. And if you think Northern Technologies International should be trading at this level for the long term, then there’s not a whole lot of upside to gain over other industry peers. Although there may be an opportunity to buy in the future. This is because Northern Technologies International’s beta (a measure of stock price volatility) is high, which means that its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s stock will likely fall more than the rest of the market, providing an excellent buying opportunity.

Can we expect growth from Northern Technologies International?

NasdaqGM: ICT Earnings and Revenue Growth August 2, 2022

Future prospects are an important aspect when considering buying a stock, especially if you are an investor looking to grow your portfolio. Buying a big company with solid prospects at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. With earnings expected to grow 22% over the next year, the short-term future looks bright for Northern Technologies International. It seems that a higher cash flow is expected for the stock, which should translate into a higher valuation of the stock.

What this means for you

Are you a shareholder? NTIC’s optimistic future growth appears to have been factored into the current share price, with shares trading around multiples of industry prices. However, there are also other important factors that we have not considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at ICTs? Will you have enough conviction to buy if the price moves below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on NTIC, now may not be the most optimal time to buy, given that it’s trading around industry price multiples. However, the optimistic forecast is encouraging for NTIC, which means that it is worth digging deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So, if you want to dig deeper into this stock, it is crucial to consider the risks it faces. In terms of investment risks, we have identified 2 warning signs with Northern Technologies Internationaland understanding them should be part of your investment process.

If you are no longer interested in Northern Technologies International, you can use our free platform to view our list of more 50 other stocks with strong growth potential.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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