Stock Analysis

Should You Investigate Abiomed, Inc. (NASDAQ:ABMD) At US$315?

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NasdaqGS:ABMD
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Today we're going to take a look at the well-established Abiomed, Inc. (NASDAQ:ABMD). The company's stock saw a double-digit share price rise of over 10% in the past couple of months on the NASDAQGS. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s examine Abiomed’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Abiomed

What is Abiomed worth?

According to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. 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 Abiomed’s ratio of 70.93x is above its peer average of 50.17x, which suggests the stock is trading at a higher price compared to the Medical Equipment industry. But, is there another opportunity to buy low in the future? Since Abiomed’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What does the future of Abiomed look like?

earnings-and-revenue-growth
NasdaqGS:ABMD Earnings and Revenue Growth April 2nd 2021

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. Abiomed's earnings over the next few years are expected to increase by 31%, 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 well and truly priced in ABMD’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe ABMD should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on ABMD for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for ABMD, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

It can be quite valuable to consider what analysts expect for Abiomed from their most recent forecasts. Luckily, you can check out what analysts are forecasting by clicking here.

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