Is There Now An Opportunity In Nanosonics Limited (ASX:NAN)?

Nanosonics Limited (ASX:NAN), might not be a large cap stock, but it led the ASX gainers with a relatively large price hike in the past couple of weeks. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s examine Nanosonics’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Nanosonics

Is Nanosonics still cheap?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 2.4% below my intrinsic value, which means if you buy Nanosonics today, you’d be paying a reasonable price for it. And if you believe the company’s true value is A$7.73, then there isn’t much room for the share price grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since Nanosonics’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What kind of growth will Nanosonics 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. Nanosonics' earnings over the next few years are expected to double, indicating a very 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? NAN’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping an eye on NAN, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, 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.

So if you'd like to dive deeper into this stock, it's crucial to consider 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 Nanosonics.

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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. 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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