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Should You Think About Buying Proto Labs, Inc. (NYSE:PRLB) Now?

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Simply Wall St
·4 min read
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Proto Labs, Inc. (NYSE:PRLB), which is in the machinery 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 NYSE. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Proto Labs’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Proto Labs

Is Proto Labs still cheap?

According to my valuation model, Proto Labs seems to be fairly priced at around 3.16% above my intrinsic value, which means if you buy Proto Labs today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is $74.85, then there isn’t really any room for the share price grow beyond what it’s currently trading. So, is there another chance to buy low in the future? Given that Proto Labs’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from Proto Labs?

NYSE:PRLB Past and Future Earnings April 13th 2020
NYSE:PRLB Past and Future Earnings April 13th 2020

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 negative profit growth of -18% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Proto Labs. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? Currently, PRLB appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on PRLB for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on PRLB should the price fluctuate below its true value.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Proto Labs. You can find everything you need to know about Proto Labs in the latest infographic research report. If you are no longer interested in Proto Labs, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.

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. Thank you for reading.