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Perceptron, Inc. (NASDAQ:PRCP), which is in the electronic business, and is based in United States, saw a decent share price growth in the teens level on the NASDAQGM over the last few months. 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 examine Perceptron’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Check out our latest analysis for Perceptron
What's the opportunity in Perceptron?
According to my relative valuation model, the stock seems to be currently fairly priced. 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 Perceptron’s ratio of 21.78x is trading slightly above its industry peers’ ratio of 18.06x, which means if you buy Perceptron today, you’d be paying a relatively fair price for it. And if you believe that Perceptron should be trading at this level in the long run, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because Perceptron’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 Perceptron 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 Perceptron, it is expected to deliver a negative earnings growth of -20%, 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? PRCP seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on PRCP, take a look at whether its fundamentals have changed.