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Portillo's Inc. (NASDAQ:PTLO), might not be a large cap stock, but it saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$13.88 and falling to the lows of US$8.98. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Portillo's' current trading price of US$8.98 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Portillo's’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 Portillo's
What Is Portillo's Worth?
According to our 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. 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 21.6x is currently trading slightly below its industry peers’ ratio of 23.84x, which means if you buy Portillo's today, you’d be paying a decent price for it. And if you believe that Portillo's 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 Portillo's’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 Portillo's 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. Portillo's' earnings over the next few years are expected to increase by 23%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? It seems like the market has already priced in PTLO’s positive outlook, 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 PTLO? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?