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Sow Good Inc. (NASDAQ:SOWG), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the NASDAQCM over the last few months. While good news for shareholders, the company has traded much higher in the past year. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine Sow Good’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
View our latest analysis for Sow Good
What Is Sow Good Worth?
Good news, investors! Sow Good is still a bargain right now according to our price multiple model, which compares the company's price-to-earnings ratio to the industry average. We’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 15.88x is currently well-below the industry average of 20.05x, meaning that it is trading at a cheaper price relative to its peers. However, given that Sow Good’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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from Sow Good?
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 an extremely negative double-digit change in profit expected next year, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Sow Good, at least in the near future.
What This Means For You
Are you a shareholder? Although SOWG is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to SOWG, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping an eye on SOWG for a while, but hesitant on making the leap, we recommend you research further into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.