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

By
Simply Wall St
Published
November 22, 2021
TSX:ITP
Source: Shutterstock

Intertape Polymer Group Inc. (TSE:ITP), is not the largest company out there, but it saw significant share price movement during recent months on the TSX, rising to highs of CA$31.19 and falling to the lows of CA$24.87. 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$25.09 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.

Check out our latest analysis for Intertape Polymer Group

What is Intertape Polymer Group 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 15.41x is currently trading slightly above its industry peers’ ratio of 14.92x, which means if you buy Intertape Polymer Group today, you’d be paying a relatively sensible price for it. And if you believe Intertape Polymer Group should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. Although, there may be an opportunity to buy in the future. This is because Intertape Polymer Group’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.

What kind of growth will Intertape Polymer Group generate?

earnings-and-revenue-growth
TSX:ITP Earnings and Revenue Growth November 23rd 2021

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 50% over the next year, the near-term 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 confidence to invest in the company should the price drop 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 diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you'd like to know more about Intertape Polymer Group as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 2 warning signs for Intertape Polymer Group you should know about.

If you are no longer interested in Intertape Polymer Group, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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