At US$84.86, Is IPG Photonics Corporation (NASDAQ:IPGP) Worth Looking At Closely?

While IPG Photonics Corporation (NASDAQ:IPGP) might not have the largest market cap around , it had a relatively subdued couple of weeks in terms of changes in share price, which continued to float around the range of US$83.55 to US$91.02. However, is this the true valuation level of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at IPG Photonics’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for IPG Photonics

What's The Opportunity In IPG Photonics?

The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that IPG Photonics’s ratio of 21.15x is trading slightly above its industry peers’ ratio of 21.01x, which means if you buy IPG Photonics today, you’d be paying a relatively sensible price for it. And if you believe that IPG Photonics should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Although, there may be an opportunity to buy in the future. This is because IPG Photonics’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What does the future of IPG Photonics look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Though in the case of IPG Photonics, 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? IPGP 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 IPGP, take a look at whether its fundamentals have changed.

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

Diving deeper into the forecasts for IPG Photonics mentioned earlier will help you understand how analysts view the stock going forward. So feel free to check out our free graph representing analyst forecasts.

If you are no longer interested in IPG Photonics, 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com