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While NETGEAR, Inc. (NASDAQ:NTGR) might not have the largest market cap around , it received a lot of attention from a substantial price increase on the NASDAQGS over the last few months. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. Less-covered, small caps tend to present 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 NETGEAR’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What Is NETGEAR Worth?
NETGEAR appears to be expensive according to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and 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 NETGEAR’s ratio of 31.2x is above its peer average of 22.21x, which suggests the stock is trading at a higher price compared to the Communications industry. But, is there another opportunity to buy low in the future? Since NETGEAR’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. 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.
View our latest analysis for NETGEAR
What does the future of NETGEAR 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 NETGEAR, it is expected to deliver a relatively unexciting top-line growth of 4.1% over the next year, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.
What This Means For You
Are you a shareholder? It seems like the market has well and truly priced in NTGR’s outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe NTGR should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.