Is It Too Late To Consider Buying Thermon Group Holdings, Inc. (NYSE:THR)?

Thermon Group Holdings, Inc. (NYSE:THR), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the NYSE over the last few months. Less-covered, small caps tend to present 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? Let’s examine Thermon Group Holdings’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Thermon Group Holdings

Is Thermon Group Holdings Still Cheap?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 21.53x is currently trading slightly above its industry peers’ ratio of 20.44x, which means if you buy Thermon Group Holdings today, you’d be paying a relatively reasonable price for it. And if you believe that Thermon Group Holdings should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Although, there may be an opportunity to buy in the future. This is because Thermon Group Holdings’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 kind of growth will Thermon Group Holdings generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. In the upcoming year, Thermon Group Holdings' earnings are expected to increase by 21%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? It seems like the market has already priced in THR’s positive outlook, with shares trading around industry price multiples. 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 THR? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on THR, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for THR, 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.

Diving deeper into the forecasts for Thermon Group Holdings mentioned earlier will help you understand how analysts view the stock going forward. Luckily, you can check out what analysts are forecasting by clicking here.

If you are no longer interested in Thermon Group Holdings, 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.