Have Investors Already Priced In Exterran Corporation’s (EXTN) Growth?
Exterran Corporation (NYSE:EXTN), an energy company based in United States, received a lot of attention from a substantial price increase on the NYSE in the over the last few months. 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? Let’s take a look at EXTN’s outlook and value based on the most recent financial data to see if the opportunity still exists. See our latest analysis for EXTN
Is EXTN still cheap?
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 2.1x is currently trading slightly above its industry peers’ ratio of 1.6x, which means if you buy EXTN today, you’d be paying a relatively fair price for it. And if you believe that EXTN should be trading at this level in the long run, there’s only an insignificant downside when the price falls to its real value. Is there another opportunity to buy low in the future? Since EXTN’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much EXTN moves relative to the rest of the market.
What kind of growth will EXTN generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 EXTN future expectations. With revenues expected to grow by a double-digit 27.11% over the next couple of years, the outlook is positive for EXTN. If the level of expenses is able to be maintained, it looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? EXTN’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 EXTN? 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 EXTN, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for EXTN, 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 Exterran. You can find everything you need to know about EXTN in the latest infographic research report. If you are no longer interested in Exterran, 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.
