What Does Patrick Industries, Inc.'s (NASDAQ:PATK) Share Price Indicate?

Patrick Industries, Inc. (NASDAQ:PATK), is not the largest company out there, but it received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$86.55 at one point, and dropping to the lows of US$74.56. 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$75.88 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

What's The Opportunity In Patrick Industries?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 6.34% above my intrinsic value, which means if you buy Patrick Industries today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth $71.35, then there isn’t really any room for the share price grow beyond what it’s currently trading. 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?

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. However, with a negative profit growth of -3.2% expected next year, near-term growth certainly doesn’t appear to be a driver for a buy decision for Patrick Industries. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Currently, PATK appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on PATK for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on PATK should the price fluctuate below its true value.

So while earnings quality is important, it's equally important to consider the risks facing Patrick Industries at this point in time. For example, we've discovered 3 warning signs that you should run your eye over to get a better picture of Patrick Industries.

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.