Is It Too Late To Consider Buying FAT Brands Inc. (NASDAQ:FAT)?

FAT Brands Inc. (NASDAQ:FAT), might not be a large cap stock, but it saw a decent share price growth in the teens level 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? Let’s take a look at FAT Brands’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for FAT Brands

What's The Opportunity In FAT Brands?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 6.6% 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 the company’s true value is $7.83, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because FAT Brands’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 FAT Brands generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. With profit expected to grow by 45% over the next year, the near-term future seems bright for FAT Brands. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

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 track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping tabs on FAT, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. When we did our research, we found 4 warning signs for FAT Brands (3 are significant!) that we believe deserve your full attention.

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.