What Is RADA Electronic Industries Ltd.'s (NASDAQ:RADA) Share Price Doing?
RADA Electronic Industries Ltd. (NASDAQ:RADA), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the NASDAQCM over the last few months, increasing to US$14.44 at one point, and dropping to the lows of US$10.58. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether RADA Electronic Industries' current trading price of US$11.19 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at RADA Electronic Industries’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
See our latest analysis for RADA Electronic Industries
What is RADA Electronic Industries worth?
According to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that RADA Electronic Industries’s ratio of 53.2x is above its peer average of 33.06x, which suggests the stock is trading at a higher price compared to the Aerospace & Defense industry. In addition to this, it seems like RADA Electronic Industries’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 RADA Electronic Industries?
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. RADA Electronic Industries' 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? RADA’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe RADA should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio 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 RADA for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for RADA, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. At Simply Wall St, we found 2 warning signs for RADA Electronic Industries and we think they deserve your attention.
If you are no longer interested in RADA Electronic Industries, 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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