Is Northern Technologies International Corporation (NASDAQ:NTIC) potentially undervalued?

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Northern Technologies International Corporation (NASDAQ:NTIC), is not the biggest company in the market, but it has received a lot of attention due to a substantial price movement on the NASDAQGM over the past few months, rising to 16 $.82 at one point, and falling to lows of $12.40. Certain movements in the stock price can give investors a better opportunity to get into the stock and potentially buy at a lower price. One question to answer is does Northern Technologies International’s current price of US$12.40 reflect the true value of small caps? Or is it currently undervalued, giving us the opportunity to buy? Let’s take a look at the outlook and value of Northern Technologies International based on the most recent financial data to see if there are any catalysts for a price change.

What is the opportunity at Northern Technologies International?

Good news, investors! Northern Technologies International is still a good deal right now according to my multiple price model, which compares the company’s price-earnings ratio to the industry average. I used the price/earnings ratio in this case because there is not enough visibility to predict its cash flow. The stock’s ratio of 12x is currently well below the industry average of 20.33x, meaning it is trading at a cheaper price compared to its peers. However, since Northern Technologies International’s share is quite volatile (i.e. its price movements are amplified relative to the rest of the market), this could mean that the price may drop, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator of stock price volatility.

What kind of growth will Northern Technologies International generate?

NasdaqGM: ICT Earnings and Revenue Growth as of February 1, 2022

Investors looking for portfolio growth may want to consider a company’s prospects before buying its stock. 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 double-digit earnings growth of 16% forecast for the coming year, the near-term outlook is positive 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 does this mean to you :

Are you a shareholder? Given that NTIC is currently trading below the industry PE ratio, now may be the perfect time to increase your stock holdings. With an optimistic earnings outlook on the horizon, it appears that this growth has yet to be fully priced into the stock price. However, there are also other factors such as financial health to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping tabs on ICT for a while, now might be the time to get into the stock. Its buoyant future earnings outlook is not yet fully reflected in the current share price, meaning it’s not too late to buy NTIC. But before making investment decisions, consider other factors such as the strength of its balance sheet, in order to make an informed assessment.

So while the quality of the earnings is important, it is equally important to consider the risks that Northern Technologies International faces at this stage. You would be interested to know that we have found 3 warning signs for Northern Technologies International and you will want to know them.

If you are no longer interested in Northern Technologies International, you can use our free platform to see 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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