Why Fulgent Genetics, Inc. (NASDAQ:FLGT) Could Be Worth Watching

Fulgent Genetics, Inc. (NASDAQ:FLGT), might not be a large cap stock, but it saw a double-digit share price rise of over 10% in the past couple of months on the NASDAQGM. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine Fulgent Genetics’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Our analysis indicates that FLGT is potentially undervalued!

Is Fulgent Genetics Still Cheap?

Great news for investors – Fulgent Genetics 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. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 3.09x is currently well-below the industry average of 19.64x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, Fulgent Genetics’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. 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 kind of growth will Fulgent Genetics 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. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Fulgent Genetics, at least in the near future.

What This Means For You

Are you a shareholder? Although FLGT is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. I recommend you think about whether you want to increase your portfolio exposure to FLGT, 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 FLGT 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 Fulgent Genetics at this point in time. Our analysis shows 3 warning signs for Fulgent Genetics (1 is a bit concerning!) and we strongly recommend you look at these before investing.

If you are no longer interested in Fulgent Genetics, 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.