Is It Time To Consider Buying RADA Electronic Industries Ltd. (NASDAQ:RADA)?

While RADA Electronic Industries Ltd. (NASDAQ:RADA) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the NASDAQCM over the last few months, increasing to US$11.32 at one point, and dropping to the lows of US$8.57. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether RADA Electronic Industries' current trading price of US$8.57 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 RADA Electronic Industries’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 RADA Electronic Industries

What's the opportunity in RADA Electronic Industries?

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. 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 18.48x is currently trading in-line with its industry peers’ ratio, which means if you buy RADA Electronic Industries today, you’d be paying a relatively reasonable price for it. Furthermore, it seems like RADA Electronic Industries’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

What does the future of RADA Electronic Industries look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. With profit expected to grow by 50% over the next couple of years, the future seems bright for RADA Electronic Industries. 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? It seems like the market has already priced in RADA’s positive outlook, 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 RADA? 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 an eye on RADA, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for RADA, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing RADA Electronic Industries at this point in time. You'd be interested to know, that we found 2 warning signs for RADA Electronic Industries and you'll want to know about these.

If you are no longer interested in RADA Electronic Industries, you can use our free platform to see our 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 (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.