Is ESCO Technologies Inc. (NYSE:ESE) Potentially Undervalued?
ESCO Technologies Inc. (NYSE:ESE), might not be a large cap stock, but it saw a significant share price rise of over 20% in the past couple of months on the NYSE. As a well-established company, which tends to be well-covered by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Let’s take a look at ESCO Technologies’s outlook and value based on the most recent financial data to see if the opportunity still exists.
View our latest analysis for ESCO Technologies
What's The Opportunity In ESCO Technologies?
ESCO Technologies is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that ESCO Technologies’s ratio of 31.13x is above its peer average of 21.27x, which suggests the stock is trading at a higher price compared to the Machinery industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since ESCO Technologies’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What does the future of ESCO Technologies look like?
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. With profit expected to grow by 48% over the next couple of years, the future seems bright for ESCO Technologies. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? It seems like the market has well and truly priced in ESE’s positive outlook, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe ESE should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on ESE for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for ESE, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Diving deeper into the forecasts for ESCO Technologies mentioned earlier will help you understand how analysts view the stock going forward. So feel free to check out our free graph representing analyst forecasts.
If you are no longer interested in ESCO 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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