When Should You Buy Shockwave Medical, Inc. (NASDAQ:SWAV)?

While Shockwave Medical, Inc. (NASDAQ:SWAV) might not be the most widely known stock at the moment, it saw a double-digit share price rise of over 10% in the past couple of months on the NASDAQGS. 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. However, what if the stock is still a bargain? Today I will analyse the most recent data on Shockwave Medical’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Shockwave Medical

Is Shockwave Medical Still Cheap?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 39.85x is currently trading slightly above its industry peers’ ratio of 36.77x, which means if you buy Shockwave Medical today, you’d be paying a relatively sensible price for it. And if you believe Shockwave Medical should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. Furthermore, Shockwave Medical’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

What does the future of Shockwave Medical look like?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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 a relatively muted profit growth of 6.0% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Shockwave Medical, at least in the short term.

What This Means For You

Are you a shareholder? It seems like the market has already priced in SWAV’s growth outlook, with shares trading around industry price multiples. 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 SWAV? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on SWAV, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about Shockwave Medical as a business, it's important to be aware of any risks it's facing. To that end, you should learn about the 3 warning signs we've spotted with Shockwave Medical (including 1 which is significant).

If you are no longer interested in Shockwave Medical, 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.