At US$36.03, Is Insteel Industries, Inc. (NYSE:IIIN) Worth Looking At Closely?

While Insteel Industries, Inc. (NYSE:IIIN) might not be the most widely known stock at the moment, it saw a significant share price rise of over 20% in the past couple of months on the NYSE. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s take a look at Insteel Industries’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Insteel Industries

What's The Opportunity In Insteel Industries?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 12.20% above my intrinsic value, which means if you buy Insteel Industries today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth $32.11, there’s only an insignificant downside when the price falls to its real value. Is there another opportunity to buy low in the future? Since Insteel Industries’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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 Insteel Industries look like?

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 more than double over the next couple of years, the future seems bright for Insteel 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? IIIN’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. 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 the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping an eye on IIIN, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, 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 Insteel Industries at this point in time. Case in point: We've spotted 1 warning sign for Insteel Industries you should be aware of.

If you are no longer interested in Insteel Industries, 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.