Is It Time To Consider Buying Freshpet, Inc. (NASDAQ:FRPT)?

Freshpet, Inc. (NASDAQ:FRPT), might not be a large cap stock, but it saw a significant share price rise of 21% in the past couple of months on the NASDAQGM. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Let’s examine Freshpet’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

We've discovered 1 warning sign about Freshpet. View them for free.

What Is Freshpet Worth?

The stock seems fairly valued at the moment according to our valuation model. It’s trading around 6.5% below our intrinsic value, which means if you buy Freshpet today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth $93.60, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that Freshpet’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.

View our latest analysis for Freshpet

Can we expect growth from Freshpet?

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. Freshpet's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger 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 FRPT’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 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 FRPT, now may not be the most optimal 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 further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Freshpet at this point in time. At Simply Wall St, we found 1 warning sign for Freshpet and we think they deserve your attention.

If you are no longer interested in Freshpet, 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.