What Does Northwest Pipe Company's (NASDAQ:NWPX) Share Price Indicate?

While Northwest Pipe Company (NASDAQ:NWPX) might not be the most widely known stock at the moment, it saw a double-digit share price rise of over 10% in the past couple of months on the NASDAQGS. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine Northwest Pipe’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Northwest Pipe

Is Northwest Pipe still cheap?

Good news, investors! Northwest Pipe is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio 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 11.41x is currently well-below the industry average of 25.18x, meaning that it is trading at a cheaper price relative to its peers. Northwest Pipe’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 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 Northwest Pipe look like?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. However, with a negative profit growth of -2.1% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Northwest Pipe. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? Although NWPX is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. I recommend you think about whether you want to increase your portfolio exposure to NWPX, 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 an eye on NWPX for a while, but hesitant on making the leap, I recommend you dig deeper 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.

It can be quite valuable to consider what analysts expect for Northwest Pipe from their most recent forecasts. Luckily, you can check out what analysts are forecasting by clicking here.

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This article by Simply Wall St is general in nature. 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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