Nova Measuring Instruments Ltd. (NASDAQ:NVMI), which is in the semiconductor business, and is based in Israel, received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$41.54 at one point, and dropping to the lows of US$26.82. 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 Nova Measuring Instruments’s current trading price of US$28.54 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 Nova Measuring Instruments’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What is Nova Measuring Instruments worth?
The share price seems sensible at the moment according to my price multiple model, where I compare the company’s price-to-earnings ratio to the industry average. I’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 22.64x is currently trading in-line with its industry peers’ ratio, which means if you buy Nova Measuring Instruments today, you’d be paying a relatively reasonable price for it. Although, there may be an opportunity to buy in the future. This is because Nova Measuring Instruments’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
Can we expect growth from Nova Measuring Instruments?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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 grow by 56% over the next couple of years, the future seems bright for Nova Measuring Instruments. 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? NVMI’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at NVMI? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?
Are you a potential investor? If you’ve been keeping an eye on NVMI, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for NVMI, which means it’s worth further examining other factors such as the strength of its balance sheet, 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 Nova Measuring Instruments. You can find everything you need to know about Nova Measuring Instruments in the latest infographic research report. If you are no longer interested in Nova Measuring Instruments, 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 firstname.lastname@example.org. 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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