What Does Applied Industrial Technologies Inc’s (NYSE:AIT) Share Price Indicate?

Applied Industrial Technologies Inc (NYSE:AIT), which is in the trade distributors business, and is based in United States, saw significant share price volatility over the past couple of months on the NYSE, rising to the highs of $81.15 and falling to the lows of $69.31. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Applied Industrial Technologies’s current trading price of $69.31 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Applied Industrial Technologies’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Applied Industrial Technologies

What is Applied Industrial Technologies worth?

According to my relative valuation model, the stock is currently overvalued. I’ve used the price-to-equity ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 18.96x is currently well-above the industry average of 13.84x, meaning that it is trading at a more expensive price relative to its peers. Furthermore, Applied Industrial Technologies’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

Can we expect growth from Applied Industrial Technologies?

NYSE:AIT Future Profit October 24th 18
NYSE:AIT Future Profit October 24th 18
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 profit expected to grow by 45% over the next couple of years, the future seems bright for Applied Industrial Technologies. 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 well and truly priced in AIT’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe AIT should trade below its current price, selling high and buying it back up again when its price falls towards its real value 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 tabs on AIT for some time, 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 AIT, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Applied Industrial Technologies. You can find everything you need to know about Applied Industrial Technologies in the latest infographic research report. If you are no longer interested in Applied Industrial Technologies, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.