Stock Analysis

Why Powell Industries, Inc. (NASDAQ:POWL) Could Be Worth Watching

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NasdaqGS:POWL
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While Powell Industries, Inc. (NASDAQ:POWL) 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 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?

Powell Industries appears to be expensive according to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and 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 34.67x is above its peer average of 19.76x, which suggests the stock is trading at a higher price compared to the Electrical industry. But, is there another opportunity to buy low in the future? Since Powell Industries’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. 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.

What does the future of Powell Industries look like?

earnings-and-revenue-growth
NasdaqGS:POWL Earnings and Revenue Growth October 27th 2022

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. Powell Industries' earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust 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 POWL’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe POWL should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio 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 POWL 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 positive outlook is encouraging for POWL, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Our analysis shows 2 warning signs for Powell Industries (1 doesn't sit too well with us!) and we strongly recommend you look at these before investing.

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.

What are the risks and opportunities for Powell Industries?

Powell Industries, Inc., together with its subsidiaries, designs, develops, manufactures, sells, and services custom-engineered equipment and systems for the distribution, control, and monitoring of electrical energy.

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Rewards

  • Trading at 78.9% below our estimate of its fair value

  • Earnings grew by 2077% over the past year

Risks

No risks detected for POWL from our risks checks.

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