Is It Time To Consider Buying Shoals Technologies Group, Inc. (NASDAQ:SHLS)?

Shoals Technologies Group, Inc. (NASDAQ:SHLS), might not be a large cap stock, but it saw a decent share price growth of 12% on the NASDAQGM over the last few months. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s take a look at Shoals Technologies Group’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Shoals Technologies Group

What Is Shoals Technologies Group Worth?

The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. We’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 23.47x is currently trading slightly below its industry peers’ ratio of 23.47x, which means if you buy Shoals Technologies Group today, you’d be paying a decent price for it. And if you believe that Shoals Technologies Group should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Although, there may be an opportunity to buy in the future. This is because Shoals Technologies Group’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What does the future of Shoals Technologies Group 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. With profit expected to more than double over the next couple of years, the future seems bright for Shoals Technologies Group. 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 SHLS’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 financial strength of the company. Have these factors changed since the last time you looked at SHLS? 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 SHLS, 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 SHLS, 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.

If you want to dive deeper into Shoals Technologies Group, you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 2 warning signs with Shoals Technologies Group, and understanding them should be part of your investment process.

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

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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.