Is Now An Opportune Moment To Examine Funko, Inc. (NASDAQ:FNKO)?

While Funko, Inc. (NASDAQ:FNKO) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$12.33 and falling to the lows of US$9.22. 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 Funko's current trading price of US$9.94 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 Funko’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Funko

What Is Funko Worth?

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 10.24x is currently trading slightly below its industry peers’ ratio of 13.6x, which means if you buy Funko today, you’d be paying a decent price for it. And if you believe Funko should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. So, is there another chance to buy low in the future? Given that Funko’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

Can We Expect Decent Returns From Funko?

Valuation is only one aspect of forming your investment views on Funko. Another thing to consider is whether it is actually a high-quality company. The best type of investment is always in a great company, producing robust returns at a cheap price. A way to assess stock quality is by looking how much it returns to you as the investor compared to how much you’re invested. Funko is expected to return 19% of your investment in the next couple of years if you buy the stock today. This is a relatively good return on your investment which builds up the case for owning the stock.

What This Means For You

Are you a shareholder? It seems like the market has already priced in FNKO’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 the company’s management team. Has anything significant changed since the last time you examined FNKO? And 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 tabs on FNKO for a while, 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 FNKO, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you want to dive deeper into Funko, you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 1 warning sign with Funko, and understanding this should be part of your investment process.

If you are no longer interested in Funko, 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.