Stock Analysis

Is It Time To Consider Buying Hudson Technologies, Inc. (NASDAQ:HDSN)?

NasdaqCM:HDSN
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Hudson Technologies, Inc. (NASDAQ:HDSN), might not be a large cap stock, but it saw a double-digit share price rise of over 10% in the past couple of months on the NASDAQCM. As a small cap stock, which tends to lack high analyst coverage, 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? Today I will analyse the most recent data on Hudson Technologies’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Hudson Technologies

What's The Opportunity In Hudson Technologies?

Great news for investors – Hudson Technologies 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. 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 4.29x is below its peer average of 12.37x, which indicates the stock is trading at a lower price compared to the Trade Distributors industry. Although, there may be another chance to buy again in the future. This is because Hudson Technologies’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.

What kind of growth will Hudson Technologies generate?

earnings-and-revenue-growth
NasdaqCM:HDSN Earnings and Revenue Growth May 11th 2023

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 an extremely negative double-digit change in profit expected next year, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Hudson Technologies, at least in the near future.

What This Means For You

Are you a shareholder? Although HDSN is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. I recommend you think about whether you want to increase your portfolio exposure to HDSN, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping tabs on HDSN for some time, but hesitant on making the leap, I recommend you research further into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. You'd be interested to know, that we found 1 warning sign for Hudson Technologies and you'll want to know about it.

If you are no longer interested in Hudson Technologies, 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.