Is There Now An Opportunity In Applied Industrial Technologies Inc (NYSE:AIT)?
Applied Industrial Technologies Inc (NYSE:AIT), which is in the trade distributors business, and is based in United States, saw significant share price volatility over the past couple of months on the NYSE, rising to the highs of $81.15 and falling to the lows of $61.61. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Applied Industrial Technologies’s current trading price of $61.61 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Applied Industrial Technologies’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Check out our latest analysis for Applied Industrial Technologies
Is Applied Industrial Technologies still cheap?
The stock seems fairly valued at the moment according to my relative valuation model. 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 15.2x is currently trading slightly above its industry peers’ ratio of 12.55x, which means if you buy Applied Industrial Technologies today, you’d be paying a relatively fair price for it. And if you believe Applied Industrial Technologies should be trading in this range, then there isn’t really any room for the share price grow beyond what it’s currently trading. So, is there another chance to buy low in the future? Given that Applied Industrial Technologies’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from Applied Industrial Technologies?
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 the company’s future expectations. In the upcoming year, Applied Industrial Technologies’s earnings are expected to increase by 22%, 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? AIT’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 AIT? 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 tabs on AIT, 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 AIT, 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 Applied Industrial Technologies. You can find everything you need to know about Applied Industrial Technologies in the latest infographic research report. If you are no longer interested in Applied Industrial 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 past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
