When Should You Buy Napatech A/S (OB:NAPA)?

While Napatech A/S (OB:NAPA) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the OB over the last few months, increasing to kr17.40 at one point, and dropping to the lows of kr9.09. 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 Napatech's current trading price of kr9.09 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 Napatech’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 Napatech

Is Napatech still cheap?

Great news for investors – Napatech is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. 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 Napatech’s ratio of 14.18x is below its peer average of 23.91x, which indicates the stock is trading at a lower price compared to the Communications industry. What’s more interesting is that, Napatech’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. 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 Napatech generate?

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. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Napatech, at least in the near future.

What this means for you:

Are you a shareholder? Although NAPA is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to NAPA, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping tabs on NAPA for some time, but hesitant on making the leap, I recommend you research further into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

If you want to dive deeper into Napatech, you'd also look into what risks it is currently facing. To help with this, we've discovered 4 warning signs (2 are concerning!) that you ought to be aware of before buying any shares in Napatech.

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

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.