When Should You Buy Allied Motion Technologies Inc. (NASDAQ:AMOT)?
Allied Motion Technologies Inc. (NASDAQ:AMOT), is not the largest company out there, but it saw a double-digit share price rise of over 10% in the past couple of months on the NASDAQGM. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine Allied Motion Technologies’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Check out our latest analysis for Allied Motion Technologies
What's The Opportunity In Allied Motion Technologies?
The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’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 29.84x is currently trading slightly above its industry peers’ ratio of 25.84x, which means if you buy Allied Motion Technologies today, you’d be paying a relatively sensible price for it. And if you believe that Allied Motion Technologies should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Although, there may be an opportunity to buy in the future. This is because Allied Motion Technologies’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
Can we expect growth from Allied Motion Technologies?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Allied Motion Technologies' earnings over the next few years are expected to increase by 86%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? AMOT’s optimistic future growth appears to have been factored into the current share price, 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 AMOT? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?
Are you a potential investor? If you’ve been keeping tabs on AMOT, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for AMOT, 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.
So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. To help with this, we've discovered 2 warning signs (1 is significant!) that you ought to be aware of before buying any shares in Allied Motion Technologies.
If you are no longer interested in Allied Motion Technologies, 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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