Stock Analysis

Is Northern Technologies International Corporation (NASDAQ:NTIC) Potentially Undervalued?

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NasdaqGM:NTIC
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Northern Technologies International Corporation (NASDAQ:NTIC), is not the largest company out there, but it led the NASDAQGM gainers with a relatively large price hike in the past couple of weeks. Less-covered, small caps tend to present 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? Today I will analyse the most recent data on Northern Technologies International’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Northern Technologies International

What's The Opportunity In Northern Technologies International?

The share price seems sensible at the moment 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 16.75x is currently trading slightly above its industry peers’ ratio of 14.11x, which means if you buy Northern Technologies International today, you’d be paying a relatively reasonable price for it. And if you believe Northern Technologies International 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. Is there another opportunity to buy low in the future? Since Northern Technologies International’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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 Northern Technologies International generate?

earnings-and-revenue-growth
NasdaqGM:NTIC Earnings and Revenue Growth September 30th 2022

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. In the upcoming year, Northern Technologies International's earnings are expected to increase by 22%, 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 already priced in NTIC’s positive 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 NTIC? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on NTIC, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for NTIC, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. In terms of investment risks, we've identified 2 warning signs with Northern Technologies International, and understanding these should be part of your investment process.

If you are no longer interested in Northern Technologies International, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Valuation is complex, but we're helping make it simple.

Find out whether Northern Technologies International is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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About NasdaqGM:NTIC

Northern Technologies International

Northern Technologies International Corporation develops and markets rust and corrosion inhibiting products and services in North America, South America, Europe, Asia, the Middle East and internationally.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation0
Future Growth4
Past Performance1
Financial Health4
Dividends2

Read more about these checks in the individual report sections or in our analysis model.

Reasonable growth potential with adequate balance sheet.