Why CPI Card Group Inc. (NASDAQ:PMTS) Could Be Worth Watching
While CPI Card Group Inc. (NASDAQ:PMTS) might not have the largest market cap around , it led the NASDAQGM gainers with a relatively large price hike in the past couple of weeks. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. 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 examine CPI Card Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
View our latest analysis for CPI Card Group
What Is CPI Card Group Worth?
Good news, investors! CPI Card Group is still a bargain right now according to our price multiple model, which compares the company's price-to-earnings ratio to the industry average. We’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 6.44x is currently well-below the industry average of 28.21x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, CPI Card Group’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to move closer to its industry peers, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
What kind of growth will CPI Card Group generate?
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. However, with a negative profit growth of -17% expected next year, near-term growth certainly doesn’t appear to be a driver for a buy decision for CPI Card Group. This certainty tips the risk-return scale towards higher risk.
What This Means For You
Are you a shareholder? Although PMTS is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to PMTS, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping an eye on PMTS for a while, but hesitant on making the leap, we recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. To help with this, we've discovered 3 warning signs (2 are concerning!) that you ought to be aware of before buying any shares in CPI Card Group.
If you are no longer interested in CPI Card Group, 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.
