At US$40.00, Is Allied Motion Technologies Inc. (NASDAQ:AMOT) Worth Looking At Closely?
Allied Motion Technologies Inc. (NASDAQ:AMOT), is not the largest company out there, but it received a lot of attention from a substantial price increase on the NASDAQGM over the last few months. As a small cap stock, which tends to lack high analyst coverage, 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 Allied Motion Technologies’s outlook and valuation to see if the opportunity still exists.
View our latest analysis for Allied Motion Technologies
Is Allied Motion Technologies Still Cheap?
According to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. 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 Allied Motion Technologies’s ratio of 41.67x is above its peer average of 20.79x, which suggests the stock is trading at a higher price compared to the Electrical industry. But, is there another opportunity to buy low in the future? Since Allied Motion Technologies’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 kind of growth will Allied Motion Technologies generate?
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. Allied Motion Technologies' earnings over the next few years are expected to double, indicating a very 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 AMOT’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe AMOT 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 tabs on AMOT for some time, 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 positive outlook is encouraging for AMOT, 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 Allied Motion Technologies at this point in time. For instance, we've identified 3 warning signs for Allied Motion Technologies (1 is concerning) you should be familiar with.
If you are no longer interested in Allied Motion Technologies, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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