At US$40.34, Is Hawkins, Inc. (NASDAQ:HWKN) Worth Looking At Closely?

Hawkins, Inc. (NASDAQ:HWKN), might not be a large cap stock, but it saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$44.13 and falling to the lows of US$38.28. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Hawkins' current trading price of US$40.34 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Hawkins’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Hawkins

Is Hawkins 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 14.39x is currently trading slightly above its industry peers’ ratio of 13.67x, which means if you buy Hawkins today, you’d be paying a relatively sensible price for it. And if you believe that Hawkins should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Furthermore, it seems like Hawkins’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

What does the future of Hawkins 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. Though in the case of Hawkins, it is expected to deliver a negative earnings growth of -2.8%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? Currently, HWKN appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on HWKN, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on HWKN for a while, now may not be the most optimal time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on HWKN should the price fluctuate below the industry PE ratio.

If you want to dive deeper into Hawkins, you'd also look into what risks it is currently facing. For example - Hawkins has 1 warning sign we think you should be aware of.

If you are no longer interested in Hawkins, 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.