Is It Too Late To Consider Buying Patrick Industries, Inc. (NASDAQ:PATK)?

By
Simply Wall St
Published
May 22, 2022
NasdaqGS:PATK
Source: Shutterstock

Patrick Industries, Inc. (NASDAQ:PATK), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$72.76 at one point, and dropping to the lows of US$55.69. 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 Patrick Industries' current trading price of US$57.26 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 Patrick Industries’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 Patrick Industries

Is Patrick Industries still cheap?

Great news for investors – Patrick Industries 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. 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 4.54x is currently well-below the industry average of 14.47x, meaning that it is trading at a cheaper price relative to its peers. However, given that Patrick Industries’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 Patrick Industries generate?

earnings-and-revenue-growth
NasdaqGS:PATK Earnings and Revenue Growth May 22nd 2022

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 a relatively muted profit growth of 4.3% expected over the next year, growth doesn’t seem like a key driver for a buy decision for Patrick Industries, at least in the short term.

What this means for you:

Are you a shareholder? Even though growth is relatively muted, since PATK is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as financial health to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on PATK for a while, now might be the time to enter the stock. Its future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy PATK. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.

If you'd like to know more about Patrick Industries as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 5 warning signs for Patrick Industries you should be mindful of and 2 of these don't sit too well with us.

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

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