Is It Time To Consider Buying Camtek Ltd. (NASDAQ:CAMT)?

Camtek Ltd. (NASDAQ:CAMT), is not the largest company out there, but it received a lot of attention from a substantial price increase on the NASDAQGM over the last few months. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Let’s examine Camtek’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Camtek

What's The Opportunity In Camtek?

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 25.52x is currently trading slightly above its industry peers’ ratio of 23.28x, which means if you buy Camtek today, you’d be paying a relatively reasonable price for it. And if you believe that Camtek should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Is there another opportunity to buy low in the future? Since Camtek’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 does the future of Camtek 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. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a negative profit growth of -4.4% expected next year, near-term growth certainly doesn’t appear to be a driver for a buy decision for Camtek. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? CAMT seems priced close to industry peers right now, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on CAMT, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on CAMT 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. In addition to this, 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 crystallize your views on CAMT should the price fluctuate below the industry PE ratio.

Diving deeper into the forecasts for Camtek mentioned earlier will help you understand how analysts view the stock going forward. At Simply Wall St, we have the analysts estimates which you can view by clicking here.

If you are no longer interested in Camtek, 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.