At US$6.50, Is FAT Brands Inc. (NASDAQ:FAT) Worth Looking At Closely?

While FAT Brands Inc. (NASDAQ:FAT) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase on the NASDAQCM over the last few months. 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? Today I will analyse the most recent data on FAT Brands’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for FAT Brands

Is FAT Brands Still Cheap?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 6.4% below my intrinsic value, which means if you buy FAT Brands today, you’d be paying a fair price for it. And if you believe that the stock is really worth $6.95, then there isn’t much room for the share price grow beyond what it’s currently trading. So, is there another chance to buy low in the future? Given that FAT Brands’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will FAT Brands 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, FAT Brands' earnings are expected to increase by 27%, 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 FAT’s positive outlook, with shares trading around its fair value. 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 the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on FAT, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, 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.

If you want to dive deeper into FAT Brands, you'd also look into what risks it is currently facing. Our analysis shows 5 warning signs for FAT Brands (3 are significant!) and we strongly recommend you look at these before investing.

If you are no longer interested in FAT Brands, 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.