What Does CSW Industrials, Inc.'s (NASDAQ:CSWI) Share Price Indicate?

While CSW Industrials, Inc. (NASDAQ:CSWI) might not be the most widely known stock at the moment, it led the NASDAQGS gainers with a relatively large price hike in the past couple of weeks. As a US$2.2b market-cap stock, it seems odd CSW Industrials is not more well-covered by analysts. However, this is not necessarily a bad thing given that there are less eyes on the stock to push it closer to fair value. Is there still an opportunity to buy? Let’s examine CSW Industrials’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for CSW Industrials

What Is CSW Industrials Worth?

CSW Industrials is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison 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 25.46x is currently well-above the industry average of 14.43x, meaning that it is trading at a more expensive price relative to its peers. Furthermore, CSW Industrials’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach levels around its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

What does the future of CSW Industrials look like?

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. With profit expected to grow by a double-digit 19% over the next couple of years, the outlook is positive for CSW Industrials. 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? It seems like the market has well and truly priced in CSWI’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe CSWI should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on CSWI for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for CSWI, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example - CSW Industrials has 1 warning sign we think you should be aware of.

If you are no longer interested in CSW Industrials, 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.