Titan Machinery Inc. (NASDAQ:TITN), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$34.25 at one point, and dropping to the lows of US$22.34. 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 Titan Machinery's current trading price of US$22.34 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 Titan Machinery’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What is Titan Machinery worth?
Great news for investors – Titan Machinery is still trading at a fairly cheap price 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 Titan Machinery’s ratio of 7.64x is below its peer average of 12.97x, which indicates the stock is trading at a lower price compared to the Trade Distributors industry. However, given that Titan Machinery’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from Titan Machinery?
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. However, with a relatively muted profit growth of 8.0% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Titan Machinery, at least in the short term.
What this means for you:
Are you a shareholder? Even though growth is relatively muted, since TITN is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as financial health to consider, which could explain the current price multiple.
Are you a potential investor? If you’ve been keeping an eye on TITN for a while, now might be the time to enter the stock. Its future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy TITN. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed assessment.
So while earnings quality is important, it's equally important to consider the risks facing Titan Machinery at this point in time. For example - Titan Machinery has 1 warning sign we think you should be aware of.
If you are no longer interested in Titan Machinery, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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.