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Snap-on Incorporated (NYSE:SNA), which is in the machinery business, and is based in United States, saw significant share price movement during recent months on the NYSE, rising to highs of $171.46 and falling to the lows of $149.96. 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 Snap-on's current trading price of $156.6 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Snap-on’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is Snap-on still cheap?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 2.5% below my intrinsic value, which means if you buy Snap-on today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth $160.6, 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 Snap-on’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 does the future of Snap-on look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 Snap-on, it is expected to deliver a relatively unexciting earnings growth of 7.9%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.
What this means for you:
Are you a shareholder? SNA’s 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 financial strength of the company. Have these factors changed since the last time you looked at the stock? 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 SNA, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook 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 Snap-on. You can find everything you need to know about Snap-on in the latest infographic research report. If you are no longer interested in Snap-on, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Thank you for reading.