Why Lawson Products, Inc. (NASDAQ:LAWS) Could Be Worth Watching
While Lawson Products, Inc. (NASDAQ:LAWS) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$56.20 and falling to the lows of US$49.61. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Lawson Products' current trading price of US$50.01 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Lawson Products’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Check out our latest analysis for Lawson Products
What is Lawson Products worth?
Lawson Products 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 Lawson Products’s ratio of 53.46x is above its peer average of 21.32x, which suggests the stock is trading at a higher price compared to the Trade Distributors industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Lawson Products’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will Lawson Products 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. In Lawson Products' 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 LAWS’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 LAWS 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 LAWS 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 LAWS, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
If you'd like to know more about Lawson Products as a business, it's important to be aware of any risks it's facing. For example, we've discovered 2 warning signs that you should run your eye over to get a better picture of Lawson Products.
If you are no longer interested in Lawson Products, 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. 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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