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Pro-Dex, Inc. (NASDAQ:PDEX), is not the largest company out there, but it saw significant share price movement during recent months on the NASDAQCM, rising to highs of US$33.97 and falling to the lows of US$23.78. 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 Pro-Dex's current trading price of US$23.78 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 Pro-Dex’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is Pro-Dex still cheap?
Great news for investors – Pro-Dex is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. 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 Pro-Dex’s ratio of 14.85x is below its peer average of 51.74x, which indicates the stock is trading at a lower price compared to the Medical Equipment industry. Although, there may be another chance to buy again in the future. This is because Pro-Dex’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will Pro-Dex generate?
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. Though in the case of Pro-Dex, it is expected to deliver a negative earnings growth of -1.2%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What this means for you:
Are you a shareholder? Although PDEX is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to PDEX, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping tabs on PDEX for some time, but hesitant on making the leap, I recommend you research further into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Be aware that Pro-Dex is showing 3 warning signs in our investment analysis and 2 of those make us uncomfortable...
If you are no longer interested in Pro-Dex, 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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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