Johnson Outdoors Inc. (NASDAQ:JOUT), is not the largest company out there, but it saw a significant share price rise of over 20% in the past couple of months on the NASDAQGS. 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 take a look at Johnson Outdoors’s outlook and value based on the most recent financial data to see if the opportunity still exists.
What's the opportunity in Johnson Outdoors?
Great news for investors – Johnson Outdoors is still trading at a fairly cheap price 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 21.39x is currently well-below the industry average of 31.41x, meaning that it is trading at a cheaper price relative to its peers. Johnson Outdoors’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
What kind of growth will Johnson Outdoors 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. Though in the case of Johnson Outdoors, it is expected to deliver a relatively unexciting earnings growth of 9.1%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for Johnson Outdoors, at least in the near term.
What this means for you:
Are you a shareholder? Even though growth is relatively muted, since JOUT is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.
Are you a potential investor? If you’ve been keeping an eye on JOUT for a while, now might be the time to make a leap. Its future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy JOUT. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.
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 Johnson Outdoors and we think they deserve your attention.
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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.
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