When Should You Buy Sun Hydraulics Corporation (NASDAQ:SNHY)?

Sun Hydraulics Corporation (NASDAQ:SNHY), a machinery company based in United States, received a lot of attention from a substantial price movement on the NasdaqGS in the over the last few months, increasing to $70.26 at one point, and dropping to the lows of $51.92. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Sun Hydraulics's current trading price of $56.29 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 Sun Hydraulics’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. View our latest analysis for Sun Hydraulics

What's the opportunity in Sun Hydraulics?

Sun Hydraulics is currently overpriced based on my relative valuation model. In this instance, I’ve used the price-to-equity (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Sun Hydraulics’s ratio of 48.22x is above its peer average of 24.97x, which suggests the stock is overvalued compared to the Machinery industry. But, is there another opportunity to buy low in the future? Given that Sun Hydraulics’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of Sun Hydraulics look like?

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. Sun Hydraulics’s earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has well and truly priced in SNHY’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe SNHY should trade below its current price, selling high and buying it back up again when its price falls towards its real value 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 SNHY 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 SNHY, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Sun Hydraulics. You can find everything you need to know about Sun Hydraulics in the latest infographic research report. If you are no longer interested in Sun Hydraulics, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com

Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.