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Vectrus, Inc. (NYSE:VEC), which is in the aerospace & defense business, and is based in United States, saw a significant share price rise of over 20% in the past couple of months on the NYSE. 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 Vectrus’s outlook and valuation to see if the opportunity still exists.
What’s the opportunity in Vectrus?Great news for investors – Vectrus is still trading at a fairly cheap price. 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 Vectrus’s ratio of 4.72x is below its peer average of 20.79x, which suggests the stock is undervalued compared to the Aerospace & Defense industry. Although, there may be another chance to buy again in the future. This is because Vectrus’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 Vectrus 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. Though in the case of Vectrus, it is expected to deliver a highly negative earnings growth in the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What this means for you:
Are you a shareholder? Although VEC is currently undervalued, the negative outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to VEC, 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 an eye on VEC for a while, but hesitant on making the leap, I recommend you research further into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Vectrus. You can find everything you need to know about Vectrus in the latest infographic research report. If you are no longer interested in Vectrus, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.