Insteel Industries, Inc. (NASDAQ:IIIN), which is in the building business, and is based in United States, saw a significant share price rise of over 20% in the past couple of months on the NASDAQGS. 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? Today I will analyse the most recent data on Insteel Industries’s outlook and valuation to see if the opportunity still exists.
Is Insteel Industries still cheap?
The stock is currently trading at US$13.79 on the share market, which means it is overvalued by 43% compared to my intrinsic value of $9.64. This means that the opportunity to buy Insteel Industries at a good price has disappeared! If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since Insteel Industries’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What does the future of Insteel Industries look like?
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. With profit expected to more than double in the upcoming, the future appears to be extremely bright for Insteel Industries. 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 well and truly priced in IIIN’s positive outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe IIIN should trade below its current price, selling high and buying it back up again when its price falls towards its real value 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 tabs on IIIN for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for IIIN, which means it’s worth diving deeper into other factors 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 Insteel Industries. You can find everything you need to know about Insteel Industries in the latest infographic research report. If you are no longer interested in Insteel Industries, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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.
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