Is Now The Time To Look At Buying Everspin Technologies, Inc. (NASDAQ:MRAM)?

Everspin Technologies, Inc. (NASDAQ:MRAM), 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. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s take a look at Everspin Technologies’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for Everspin Technologies

What's The Opportunity In Everspin Technologies?

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. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Everspin Technologies’s ratio of 16.92x is trading slightly below its industry peers’ ratio of 17.01x, which means if you buy Everspin Technologies today, you’d be paying a reasonable price for it. And if you believe Everspin Technologies 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. Is there another opportunity to buy low in the future? Since Everspin Technologies’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.

Can we expect growth from Everspin Technologies?

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 Everspin Technologies, it is expected to deliver a highly negative earnings growth in the upcoming, 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? MRAM 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 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 MRAM, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on MRAM 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 crystallize your views on MRAM should the price fluctuate below the industry PE ratio.

If you want to dive deeper into Everspin Technologies, you'd also look into what risks it is currently facing. Case in point: We've spotted 4 warning signs for Everspin Technologies you should be mindful of and 1 of them is significant.

If you are no longer interested in Everspin Technologies, 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.