Is Now The Time To Look At Buying Northwest Pipe Company (NASDAQ:NWPX)?
While Northwest Pipe Company (NASDAQ: NWPX) may not be the best-known stock right now, it has led NASDAQGS winners to a relatively strong spike in recent weeks. As a small-cap stock that is barely covered by analysts, it is generally more likely to be mispriced as there is less activity to bring the stock closer to fair value. Is there still a purchase option here? Let's take a look at the prospect and value of Northwest Pipe based on the latest financial data to see if the opportunity still exists.
Check out our latest analysis for Northwest Pipe
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What's the chance in Northwest Pipe?
Great news for investors - Northwest Pipe is still trading at a relatively low price on my multiple price model. I compare the company's price-performance ratio with the industry average. In this case, I used price-to-earnings (PE) because there isn't enough information to reliably predict the stock's cash flows. I find that the Northwest Pipe quote of 9.5x is below the comparative average of 20.66x, indicating that the stock is trading at a lower price compared to the construction industry. What is more interesting is that Northwest Pipe's share price is pretty stable, which could mean two things: first, it may take a while for the share price to approach its industry peers, and second, there may be less chance of buying cheap in the future once they get this one Value reached. This is because the stock is less volatile than the broader market because of its low beta.
Can we expect growth from Northwest Pipe?
Profit and sales growth
Investors looking to grow their portfolio should consider a company's prospects before buying their stocks. Although value investors would argue that intrinsic value relative to price is what matters most, a more compelling investment thesis would be high growth potential at a low price. However, given an extremely negative double-digit change in earnings expected next year, the short-term growth is certainly not a driver of a buying decision. At least in the near future, a high level of uncertainty appears to be at stake for Northwest Pipe.
What this means for you:
Are you a shareholder? Although NWPX is currently trading below the PE ratio of the industry, the negative earnings outlook brings with it some uncertainty, which corresponds to a higher risk. I encourage you to think about whether you want to increase your portfolio exposure to NWPX or whether diversifying into another stock is a better move for your overall risk and return.
Are you a potential investor? If you've been keeping your eye on NWPX for a while but are hesitant to take the plunge, I recommend researching the stock further. Given the current price multiplier, now is a good time to make a decision. However, be aware of the risks associated with negative growth prospects for the future.
While the quality of the yield is important, it is equally important to consider the risks Northwest Pipe is facing at this point in time. Case in point: we spotted two warning signs for Northwest Pipe to look out for, and one of them may be serious.
When you're no longer interested in Northwest Pipe, you can use our free platform to view our list of over 50 other stocks with high growth potential.
This article from Simply Wall St is of a general nature. It is not a recommendation to buy or sell stocks and does not take into account your goals or your financial situation. We want to provide you with a long-term, focused analysis based on fundamental data. Note that our analysis may not take into account the latest price sensitive company announcements or quality materials. Simply Wall St has no position in the stocks mentioned.
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