At US$2.83, Is Hudson Technologies, Inc. (NASDAQ:HDSN) Worth Looking At Closely?

Hudson Technologies, Inc. (NASDAQ:HDSN), is not the largest company out there, but it received a lot of attention from a substantial price increase on the NASDAQCM over the last few months. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s examine Hudson Technologies’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Hudson Technologies

Is Hudson Technologies still cheap?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 Hudson Technologies’s ratio of 22.21x is trading slightly below its industry peers’ ratio of 23.23x, which means if you buy Hudson Technologies today, you’d be paying a reasonable price for it. And if you believe Hudson Technologies should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. Is there another opportunity to buy low in the future? Since Hudson Technologies’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from Hudson Technologies?

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 58% over the next year, the near-term future seems bright for Hudson Technologies. 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? HDSN’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 financial strength of the company. Have these factors changed since the last time you looked at HDSN? 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 HDSN, 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 HDSN, 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.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Be aware that Hudson Technologies is showing 6 warning signs in our investment analysis and 2 of those are significant...

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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.
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