Should You Buy Superconductor Technologies Inc (SCON)?
Superconductor Technologies Inc (NASDAQ:SCON), a electronic equipment, instruments and components company based in United States, received a lot of attention from a substantial price increase on the NasdaqCM in the over the last few months. Less covered, small-stocks like SCON 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 SCON still be trading at a low price relative to its actual value? Today I will analyse the most recent data on SCON’s outlook and valuation to see if the opportunity still exists. View our latest analysis for Superconductor Technologies
What is SCON worth?
The stock seems fairly valued at the moment according to my relative valuation model. In this instance, I’ve used the price-to-book (PB) ratio given that there is not enough information to reliably forecast the stock’s cash flows, and its earnings doesn’t seem to reflect its true value. I find that SCON’s ratio of 1.4x is trading slightly below its industry peers’ ratio of 2.3x, which means if you buy SCON today, you’d be paying a relatively reasonable price for it. And if you believe that SCON should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because SCON’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, SCON’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
Can we expect growth from SCON?
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. SCON’s earnings over the next few years are expected to increase by 73.49%, 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? SCON’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. 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 SCON? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping an eye on SCON, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for SCON, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Superconductor Technologies. You can find everything you need to know about SCON in the latest infographic research report. If you are no longer interested in Superconductor Technologies, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
