At US$86.42, Is It Time To Put Polaris Inc. (NYSE:PII) On Your Watch List?

Polaris Inc. (NYSE:PII), might not be a large cap stock, but it saw significant share price movement during recent months on the NYSE, rising to highs of US$137 and falling to the lows of US$84.50. 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 Polaris' current trading price of US$86.42 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Polaris’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Polaris

What's The Opportunity In Polaris?

Great news for investors – Polaris 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. 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 Polaris’s ratio of 8.19x is below its peer average of 13.49x, which indicates the stock is trading at a lower price compared to the Leisure industry. However, given that Polaris’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 Polaris 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. However, with a negative profit growth of -7.8% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Polaris. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Although PII is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to PII, 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 tabs on PII for some time, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

So while earnings quality is important, it's equally important to consider the risks facing Polaris at this point in time. To help with this, we've discovered 3 warning signs (1 doesn't sit too well with us!) that you ought to be aware of before buying any shares in Polaris.

If you are no longer interested in Polaris, 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.