What Is Ultralife Corporation's (NASDAQ:ULBI) Share Price Doing?
Ultralife Corporation (NASDAQ:ULBI), is not the largest company out there, but it saw a significant share price rise of over 20% in the past couple of months on the NASDAQGM. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine Ultralife’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
View our latest analysis for Ultralife
Is Ultralife still cheap?
Good news, investors! Ultralife is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 23.86x is currently well-below the industry average of 30.92x, meaning that it is trading at a cheaper price relative to its peers. Although, there may be another chance to buy again in the future. This is because Ultralife’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, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What does the future of Ultralife 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. With profit expected to grow by 51% over the next couple of years, the future seems bright for Ultralife. 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? Since ULBI is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. With an optimistic profit outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current price multiple.
Are you a potential investor? If you’ve been keeping an eye on ULBI for a while, now might be the time to make a leap. Its prosperous future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy ULBI. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed assessment.
So while earnings quality is important, it's equally important to consider the risks facing Ultralife at this point in time. Case in point: We've spotted 2 warning signs for Ultralife you should be aware of.
If you are no longer interested in Ultralife, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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