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Methode Electronics, Inc. (NYSE:MEI), is not the largest company out there, but it saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. 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 Methode Electronics’s outlook and value based on the most recent financial data to see if the opportunity still exists.
Is Methode Electronics still cheap?
Good news, investors! Methode Electronics is still a bargain right now. According to my valuation, the intrinsic value for the stock is $57.80, but it is currently trading at US$44.02 on the share market, meaning that there is still an opportunity to buy now. What’s more interesting is that, Methode Electronics’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. 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 Methode Electronics look like?
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. However, with a relatively muted profit growth of 6.0% expected over the next year, growth doesn’t seem like a key driver for a buy decision for Methode Electronics, at least in the short term.
What this means for you:
Are you a shareholder? Even though growth is relatively muted, since MEI is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on MEI for a while, now might be the time to enter the stock. Its future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy MEI. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.
If you want to dive deeper into Methode Electronics, you'd also look into what risks it is currently facing. While conducting our analysis, we found that Methode Electronics has 2 warning signs and it would be unwise to ignore them.
If you are no longer interested in Methode Electronics, 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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