Why Fox Factory Holding Corp. (NASDAQ:FOXF) Could Be Worth Watching

Fox Factory Holding Corp. (NASDAQ:FOXF), might not be a large cap stock, but it saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$115 and falling to the lows of US$96.48. 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 Fox Factory Holding's current trading price of US$96.58 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 Fox Factory Holding’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 Fox Factory Holding

What Is Fox Factory Holding 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. 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 Fox Factory Holding’s ratio of 22.09x is trading slightly above its industry peers’ ratio of 20.72x, which means if you buy Fox Factory Holding today, you’d be paying a relatively sensible price for it. And if you believe that Fox Factory Holding should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. So, is there another chance to buy low in the future? Given that Fox Factory Holding’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Fox Factory Holding 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. With profit expected to grow by a double-digit 12% in the upcoming year, the short-term outlook is positive for Fox Factory Holding. 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? FOXF’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. 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 FOXF? 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 FOXF, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for FOXF, 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.

So while earnings quality is important, it's equally important to consider the risks facing Fox Factory Holding at this point in time. At Simply Wall St, we found 1 warning sign for Fox Factory Holding and we think they deserve your attention.

If you are no longer interested in Fox Factory Holding, 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.