Is Now The Time To Look At Buying Patrick Industries, Inc. (NASDAQ:PATK)?

Patrick Industries, Inc. (NASDAQ:PATK), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the NASDAQGS over the last few months. The recent share price gains has brought the company back closer to its yearly peak. As a mid-cap 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 Patrick Industries’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Patrick Industries

What's The Opportunity In Patrick Industries?

The stock seems fairly valued at the moment according to our valuation model. It’s trading around 9.0% below our intrinsic value, which means if you buy Patrick Industries today, you’d be paying a reasonable price for it. And if you believe the company’s true value is $104.62, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because Patrick Industries’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.

Can we expect growth from Patrick Industries?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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 32% over the next couple of years, the future seems bright for Patrick Industries. 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? PATK’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 PATK, 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 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 Patrick Industries at this point in time. In terms of investment risks, we've identified 4 warning signs with Patrick Industries, and understanding these should be part of your investment process.

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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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.