Yahoo Finance Should You Buy Penumbra Inc (NYSE:PEN) At $162.7?
Penumbra Inc (NYSE:PEN), a medical equipment company based in United States, saw a significant share price rise of over 20% in the past couple of months on the NYSE. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s take a look at Penumbra’s outlook and value based on the most recent financial data to see if the opportunity still exists. View our latest analysis for Penumbra
What’s the opportunity in Penumbra?
Penumbra is currently overpriced based on my relative valuation model. I’ve used the price-to-equity ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 412x is currently well-above the industry average of 37.46x, meaning that it is trading at a more expensive price relative to its peers. Furthermore, Penumbra’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
What kind of growth will Penumbra generate?
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. Penumbra’s earnings over the next few years are expected to increase by 66.32%, 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 well and truly priced in PEN’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe PEN should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on PEN for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for PEN, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Penumbra. You can find everything you need to know about Penumbra in the latest infographic research report. If you are no longer interested in Penumbra, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
