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inTEST Corporation (NYSEMKT:INTT), which is in the semiconductor business, and is based in United States, saw a double-digit share price rise of over 10% in the past couple of months on the AMEX. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Today I will analyse the most recent data on inTEST’s outlook and valuation to see if the opportunity still exists.
What is inTEST worth?
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 23.07x is currently trading slightly above its industry peers’ ratio of 19.84x, which means if you buy inTEST today, you’d be paying a relatively reasonable price for it. And if you believe that inTEST should be trading at this level in the long run, there’s only an insignificant downside when the price falls to its real value. Furthermore, inTEST’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.
Can we expect growth from inTEST?
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. 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. inTEST’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 already priced in INTT’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 financial strength of the company. Have these factors changed since the last time you looked at INTT? 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 INTT, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic forecast is encouraging for INTT, which means it’s worth diving deeper into 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 inTEST. You can find everything you need to know about inTEST in the latest infographic research report. If you are no longer interested in inTEST, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.