Nanometrics Incorporated (NASDAQ:NANO), which is in the semiconductor business, and is based in United States, saw a decent share price growth in the teens level on the NASDAQGS over the last few months. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s examine Nanometrics’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What is Nanometrics worth?
Great news for investors – Nanometrics is still trading at a fairly cheap price. 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 Nanometrics’s ratio of 12.14x is below its peer average of 18.43x, which suggests the stock is undervalued compared to the Semiconductor industry. However, given that Nanometrics’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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will Nanometrics 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. However, with a negative profit growth of -12% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Nanometrics. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? Although NANO 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 NANO, 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 an eye on NANO for a while, 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 Nanometrics. You can find everything you need to know about Nanometrics in the latest infographic research report. If you are no longer interested in Nanometrics, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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