KVH Industries Inc (NASDAQ:KVHI), a communications company based in United States, saw a decent share price growth in the teens level on the NasdaqGS over the last few months. As a small cap stock, which tends to lack high analyst coverage, 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? Let’s examine KVH Industries’s valuation and outlook in more detail to determine if there’s still a bargain opportunity. Check out our latest analysis for KVH Industries
What’s the opportunity in KVH Industries?
The stock seems fairly valued at the moment according to my relative valuation model. I’ve used the price-to-book ratio in this instance because there’s not enough visibility to forecast its cash flows, and its earnings doesn’t seem to reflect its true value. The stock’s ratio of 1.8x is currently trading slightly below its industry peers’ ratio of 1.8x, which means if you buy KVH Industries today, you’d be paying a relatively reasonable price for it. And if you believe that KVH Industries should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. In addition to this, it seems like KVH Industries’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.
What kind of growth will KVH Industries generate?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. KVH Industries’s earnings over the next few years are expected to increase by 92.27%, 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? It seems like the market has already priced in KVH Industries’s positive outlook, 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 KVH Industries? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping an eye on KVH Industries, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for KVH Industries, 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.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on KVH Industries. You can find everything you need to know about KVH Industries in the latest infographic research report. If you are no longer interested in KVH Industries, 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.