Pulmatrix Inc (NASDAQ:PULM), a pharmaceuticals company based in United States, led the NasdaqGM gainers with a relatively large price hike in the past couple of weeks. 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? Today I will analyse the most recent data on PULM’s outlook and valuation to see if the opportunity still exists. Check out our latest analysis for Pulmatrix
What is PULM worth?
Great news for investors – PULM is still trading at a fairly cheap price. In this instance, I’ve used price-to-book ratio (PB) ratio given that there is not enough information to reliably forecast the stock’s cash flows, and its earnings doesn’t seem to reflect its true value. I find that PULM’s ratio of 2.7x is below its peer average of 4.8x, which suggests the stock is undervalued compared to the pharmaceuticals industry. Although, there may be another chance to buy again in the future. This is because PULM’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, PULM’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
Can we expect growth from PULM?
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 PULM, it is expected to deliver a highly negative earnings growth in the next few years, 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 PULM is currently undervalued, the negative outlook does bring on some uncertainty, which equates to higher risk. I recommend you think about whether you want to increase your portfolio exposure to PULM, 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 PULM for some time, but hesitant on making the leap, I recommend you research further into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Pulmatrix. You can find everything you need to know about PULM in the latest infographic research report. If you are no longer interested in Pulmatrix, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.