Tecnoglass Inc. (NASDAQ:TGLS), which is in the basic materials business, and is based in Colombia, received a lot of attention from a substantial price increase on the NASDAQCM over the last few months. As a 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 examine Tecnoglass’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Is Tecnoglass still cheap?
According to my relative valuation model, the stock seems to be currently fairly priced. 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 19.18x is currently trading slightly below its industry peers’ ratio of 23.28x, which means if you buy Tecnoglass today, you’d be paying a fair price for it. And if you believe Tecnoglass should be trading in this range, then there isn’t much room for the share price grow beyond where it’s currently trading. Furthermore, Tecnoglass’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.
What kind of growth will Tecnoglass generate?
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. Tecnoglass’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 TGLS’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 track record of its management team. Have these factors changed since the last time you looked at TGLS? Will you have enough conviction to buy should the price fluctuate below the true value?
Are you a potential investor? If you’ve been keeping an eye on TGLS, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for TGLS, 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 Tecnoglass. You can find everything you need to know about Tecnoglass in the latest infographic research report. If you are no longer interested in Tecnoglass, 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 firstname.lastname@example.org. 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.