TowneBank (NASDAQ:TOWN), operating in the financial services industry based in United States, saw significant share price movement during recent months on the NASDAQGS, rising to highs of $28.61 and falling to the lows of $23.14. 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 TowneBank’s current trading price of $25.4 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 TowneBank’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
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What’s the opportunity in TowneBank?
The stock seems fairly valued at the moment according to my relative valuation model. 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 TowneBank’s ratio of 13.51x is trading slightly below its industry peers’ ratio of 13.66x, which means if you buy TowneBank today, you’d be paying a fair price for it. And if you believe that TowneBank should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that TowneBank’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.
What kind of growth will TowneBank 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. 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. With profit expected to grow by a double-digit 18% over the next couple of years, the outlook is positive for TowneBank. 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? It seems like the market has already priced in TOWN’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 TOWN? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping tabs on TOWN, 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 TOWN, which means it’s worth further examining 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 TowneBank. You can find everything you need to know about TowneBank in the latest infographic research report. If you are no longer interested in TowneBank, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see past 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. For errors that warrant correction please contact the editor at firstname.lastname@example.org.