Is Now An Opportune Moment To Examine Insteel Industries, Inc. (NYSE:IIIN)?

By
Simply Wall St
Published
July 24, 2021
NYSE:IIIN
Source: Shutterstock

While Insteel Industries, Inc. (NYSE:IIIN) might not be the most widely known stock at the moment, it saw a decent share price growth in the teens level on the NYSE over the last few months. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Today I will analyse the most recent data on Insteel Industries’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Insteel Industries

Is Insteel Industries still cheap?

Good news, investors! Insteel Industries is still a bargain right now according to my price multiple model, which compares 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 Insteel Industries’s ratio of 18.54x is below its peer average of 24.12x, which indicates the stock is trading at a lower price compared to the Building industry. Although, there may be another chance to buy again in the future. This is because Insteel Industries’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.

Can we expect growth from Insteel Industries?

earnings-and-revenue-growth
NYSE:IIIN Earnings and Revenue Growth July 24th 2021

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. 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 51% over the next year, the near-term 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? Since IIIN is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. With a positive profit outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. 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 IIIN for a while, now might be the time to make a leap. Its buoyant future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy IIIN. 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 investment decision.

So while earnings quality is important, it's equally important to consider the risks facing Insteel Industries at this point in time. You'd be interested to know, that we found 1 warning sign for Insteel Industries and you'll want to know about it.

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This article by Simply Wall St is general in nature. 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.
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