Is There Now An Opportunity In Insteel Industries, Inc. (NYSE:IIIN)?

While Insteel Industries, Inc. (NYSE:IIIN) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$40.81 at one point, and dropping to the lows of US$25.26. 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 Insteel Industries' current trading price of US$25.26 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 Insteel Industries’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Our analysis indicates that IIIN is potentially undervalued!

What Is Insteel Industries Worth?

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 3.94x is below its peer average of 14.74x, which indicates the stock is trading at a lower price compared to the Building industry. What’s more interesting is that, Insteel Industries’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. 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 kind of growth will Insteel Industries generate?

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. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Insteel Industries, at least in the near future.

What This Means For You

Are you a shareholder? Although IIIN is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. I recommend you think about whether you want to increase your portfolio exposure to IIIN, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping tabs on IIIN for some time, but hesitant on making the leap, I recommend you research further into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. At Simply Wall St, we found 2 warning signs for Insteel Industries and we think they deserve your attention.

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.