Yahoo Finance Should You Investigate Knowles Corporation (NYSE:KN) At US$20.87?
Knowles Corporation (NYSE:KN), which is in the electronic business, and is based in United States, received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$22.74 at one point, and dropping to the lows of US$20.12. 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 Knowles's current trading price of US$20.87 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 Knowles’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 Knowles
What's the opportunity in Knowles?
The stock seems fairly valued at the moment according to my relative valuation model. I’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 17.55x is currently trading slightly below its industry peers’ ratio of 20.93x, which means if you buy Knowles today, you’d be paying a fair price for it. And if you believe that Knowles should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that Knowles’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 kind of growth will Knowles 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. With profit expected to grow by 26% over the next couple of years, the future seems bright for Knowles. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? It seems like the market has already priced in KN’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at KN? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping an eye on KN, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for KN, which means it’s worth further examining other factors such as the strength of its balance sheet, 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 Knowles. You can find everything you need to know about Knowles in the latest infographic research report. If you are no longer interested in Knowles, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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