Should You Investigate Itron, Inc. (NASDAQ:ITRI) At US$61.29?

Itron, Inc. (NASDAQ:ITRI), which is in the electronic business, and is based in United States, saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$88.32 and falling to the lows of US$57.75. 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 Itron’s current trading price of US$61.29 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Itron’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Itron

What’s the opportunity in Itron?

According to my price multiple model, where I compare the company’s price-to-earnings ratio to the industry average, the stock currently looks expensive. 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 Itron’s ratio of 49.47x is above its peer average of 14.98x, which suggests the stock is trading at a higher price compared to the Electronic industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Itron’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 Itron generate?

NasdaqGS:ITRI Past and Future Earnings, March 16th 2020
NasdaqGS:ITRI Past and Future Earnings, March 16th 2020

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. 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. With profit expected to more than double over the next couple of years, the future seems bright for Itron. 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 well and truly priced in ITRI’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 ITRI 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 ITRI 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 optimistic prospect is encouraging for ITRI, which means it’s worth diving deeper into other factors 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 Itron. You can find everything you need to know about Itron in the latest infographic research report. If you are no longer interested in Itron, 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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