At US$12.47, Is Northern Technologies International Corporation (NASDAQ:NTIC) Worth Looking At Closely?
While Northern Technologies International Corporation (NASDAQ:NTIC) might not be the most widely known stock at the moment, it saw a decent share price growth in the teens level on the NASDAQGM over the last few months. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s take a look at Northern Technologies International’s outlook and value based on the most recent financial data to see if the opportunity still exists.
See our latest analysis for Northern Technologies International
What Is Northern Technologies International Worth?
Northern Technologies International appears to be expensive according to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. 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 Northern Technologies International’s ratio of 32.81x is above its peer average of 15.15x, which suggests the stock is trading at a higher price compared to the Chemicals industry. Furthermore, Northern Technologies International’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach levels around its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
Can we expect growth from Northern Technologies International?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. In Northern Technologies International's case, its earnings over the next year are expected to double, indicating an incredibly optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? It seems like the market has well and truly priced in NTIC’s positive outlook, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe NTIC should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on NTIC for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for NTIC, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
So while earnings quality is important, it's equally important to consider the risks facing Northern Technologies International at this point in time. At Simply Wall St, we found 2 warning signs for Northern Technologies International and we think they deserve your attention.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
