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Freshpet, Inc. (NASDAQ:FRPT), 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 NASDAQGM. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s take a look at Freshpet’s outlook and value based on the most recent financial data to see if the opportunity still exists.
What is Freshpet worth?
The stock is currently trading at US$138 on the share market, which means it is overvalued by 38% compared to my intrinsic value of $99.91. This means that the buying opportunity has probably disappeared for now. In addition to this, it seems like Freshpet’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
Can we expect growth from Freshpet?
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. Freshpet's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in FRPT’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe FRPT should trade below its current price, selling high and buying it back up again when its price falls towards its real value 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 tabs on FRPT for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for FRPT, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
If you want to dive deeper into Freshpet, you'd also look into what risks it is currently facing. For example, we've found that Freshpet has 3 warning signs (1 doesn't sit too well with us!) that deserve your attention before going any further with your analysis.
If you are no longer interested in Freshpet, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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. 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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