Is Intertape Polymer Group Inc. (TSE:ITP) Potentially Undervalued?

March 11, 2020

Intertape Polymer Group Inc. (TSE:ITP), which is in the packaging business, and is based in Canada, received a lot of attention from a substantial price movement on the TSX over the last few months, increasing to CA$17.23 at one point, and dropping to the lows of CA$11.71. 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 Intertape Polymer Group's current trading price of CA$11.71 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 Intertape Polymer Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Intertape Polymer Group

What is Intertape Polymer Group worth?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 12.46x is currently trading slightly below its industry peers’ ratio of 15.36x, which means if you buy Intertape Polymer Group today, you’d be paying a decent price for it. And if you believe that Intertape Polymer Group should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. In addition to this, it seems like Intertape Polymer Group’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will Intertape Polymer Group generate?

TSX:ITP Past and Future Earnings, March 12th 2020

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. With profit expected to grow by 70% over the next couple of years, the future seems bright for Intertape Polymer Group. 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? It seems like the market has already priced in ITP’s positive outlook, 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 ITP? 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 tabs on ITP, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for ITP, 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 Intertape Polymer Group. You can find everything you need to know about Intertape Polymer Group in the latest infographic research report. If you are no longer interested in Intertape Polymer Group, 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 editorial-team@simplywallst.com. 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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