Stock Analysis

What Is Powell Industries, Inc.'s (NASDAQ:POWL) Share Price Doing?

NasdaqGS:POWL
Source: Shutterstock

Powell Industries, Inc. (NASDAQ:POWL), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the NASDAQGS over the last few months. Less-covered, small caps tend to present 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 Powell Industries’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Powell Industries

Is Powell Industries Still Cheap?

The share price seems sensible at the moment 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 Powell Industries’s ratio of 21.18x is trading slightly above its industry peers’ ratio of 18.12x, which means if you buy Powell Industries today, you’d be paying a relatively sensible price for it. And if you believe that Powell Industries should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Furthermore, Powell Industries’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

Can we expect growth from Powell Industries?

earnings-and-revenue-growth
NasdaqGS:POWL Earnings and Revenue Growth May 4th 2023

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. 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. With revenues expected to grow by a double-digit 11% in the upcoming year, the outlook is positive for Powell Industries. If the level of expenses is able to be maintained, 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? POWL’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 track record of its management team. Have these factors changed since the last time you looked at POWL? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on POWL, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for POWL, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you want to dive deeper into Powell Industries, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 1 warning sign for Powell Industries and you'll want to know about this.

If you are no longer interested in Powell Industries, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

New: Manage All Your Stock Portfolios in One Place

We've created the ultimate portfolio companion for stock investors, and it's free.

• Connect an unlimited number of Portfolios and see your total in one currency
• Be alerted to new Warning Signs or Risks via email or mobile
• Track the Fair Value of your stocks

Try a Demo Portfolio for Free

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

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.