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Is It Time To Consider Buying ESCO Technologies Inc. (NYSE:ESE)?

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Simply Wall St
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ESCO Technologies Inc. (NYSE:ESE), which is in the machinery business, and is based in United States, received a lot of attention from a substantial price increase on the NYSE over the last few months. As a US$2.5b market-cap stock, it seems odd ESCO Technologies is not more well-covered by analysts. However, this is not necessarily a bad thing given that there are less eyes on the stock to push it closer to fair value. Is there still an opportunity to buy? Let’s take a look at ESCO Technologies’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for ESCO Technologies

Is ESCO Technologies still cheap?

According to my valuation model, ESCO Technologies seems to be fairly priced at around 3.72% above my intrinsic value, which means if you buy ESCO Technologies today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth $94.07, there’s only an insignificant downside when the price falls to its real value. Is there another opportunity to buy low in the future? Since ESCO Technologies’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What kind of growth will ESCO Technologies generate?

NYSE:ESE Past and Future Earnings, January 14th 2020
NYSE:ESE Past and Future Earnings, January 14th 2020

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. With profit expected to grow by a double-digit 16% over the next couple of years, the outlook is positive for ESCO Technologies. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? ESE’s optimistic future growth appears to have been factored into the current share price, 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 the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on ESE, 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 the company, 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 ESCO Technologies. You can find everything you need to know about ESCO Technologies in the latest infographic research report. If you are no longer interested in ESCO Technologies, 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.