Should You Think About Buying Camtek Ltd. (NASDAQ:CAMT) Now?

Camtek Ltd. (NASDAQ:CAMT), might not be a large cap stock, but it saw a significant share price rise of over 20% in the past couple of months on the NASDAQGM. 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? Today I will analyse the most recent data on Camtek’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Camtek

What Is Camtek 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 16.33x is currently trading slightly below its industry peers’ ratio of 17.92x, which means if you buy Camtek today, you’d be paying a reasonable price for it. And if you believe that Camtek should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. So, is there another chance to buy low in the future? Given that Camtek’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.

What does the future of Camtek look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Though in the case of Camtek, it is expected to deliver a relatively unexciting earnings growth of 2.0%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for Camtek, at least in the near term.

What This Means For You

Are you a shareholder? CAMT’s future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at CAMT? 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 an eye on CAMT, now may not be the most optimal 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.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Every company has risks, and we've spotted 1 warning sign for Camtek you should know about.

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.