When Should You Buy Escalade, Incorporated (NASDAQ:ESCA)?

Escalade, Incorporated (NASDAQ:ESCA), is not the largest company out there, but it saw a double-digit share price rise of over 10% in the past couple of months on the NASDAQGM. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s take a look at Escalade’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Escalade

What's The Opportunity In Escalade?

According to my valuation model, the stock is currently overvalued by about 30%, trading at US$10.24 compared to my intrinsic value of $7.88. This means that the buying opportunity has probably disappeared for now. But, is there another opportunity to buy low in the future? Given that Escalade’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of Escalade look like?

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. 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. Though in the case of Escalade, it is expected to deliver a negative earnings growth of -3.0%, 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? If you believe ESCA is currently trading above its value, selling high and buying it back up again when its price falls towards its real value can be profitable. Given the risk from a negative growth outlook, this could be the right time to de-risk your portfolio. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on ESCA for some time, now may not be the best time to enter into the stock. Its price has risen beyond its true value, on top of a negative future outlook. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Should the price fall in the future, will you be well-informed enough to buy?

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Be aware that Escalade is showing 2 warning signs in our investment analysis and 1 of those doesn't sit too well with us...

If you are no longer interested in Escalade, 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.