Today we're going to take a look at the well-established Snap-on Incorporated (NYSE:SNA). The company's stock received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$256 at one point, and dropping to the lows of US$213. 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 Snap-on's current trading price of US$220 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Snap-on’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is Snap-on still cheap?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 19% below my intrinsic value, which means if you buy Snap-on today, you’d be paying a reasonable price for it. And if you believe the company’s true value is $271.36, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because Snap-on’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.
What does the future of Snap-on look like?
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. With profit expected to grow by a double-digit 10% over the next couple of years, the outlook is positive for Snap-on. 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? SNA’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 SNA, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook 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.
Since timing is quite important when it comes to individual stock picking, it's worth taking a look at what those latest analysts forecasts are. Luckily, you can check out what analysts are forecasting by clicking here.
If you are no longer interested in Snap-on, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
If you’re looking to trade Snap-on, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted
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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.