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Is Camtek Ltd. (NASDAQ:CAMT) Potentially Undervalued?

Simply Wall St

Camtek Ltd. (NASDAQ:CAMT), which is in the semiconductor business, and is based in Israel, saw a double-digit share price rise of over 10% in the past couple of months on the NASDAQGM. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Today I will analyse the most recent data on Camtek’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Camtek

What's the opportunity in Camtek?

Good news, investors! Camtek is still a bargain right now. 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 17.11x is currently well-below the industry average of 29.9x, meaning that it is trading at a cheaper price relative to its peers. However, given that Camtek’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of Camtek look like?

NasdaqGM:CAMT Past and Future Earnings, December 4th 2019

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. However, with a negative profit growth of -0.8% expected next year, near-term growth certainly doesn’t appear to be a driver for a buy decision for Camtek. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? Although CAMT is currently undervalued, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to CAMT, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping tabs on CAMT for some time, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Camtek. You can find everything you need to know about Camtek in the latest infographic research report. If you are no longer interested in Camtek, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.