Bel Fuse Inc. (NASDAQ:BELF.B), which is in the electronic business, and is based in United States, led the NASDAQGS gainers with a relatively large price hike in the past couple of weeks. 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 take a look at Bel Fuse’s outlook and value based on the most recent financial data to see if the opportunity still exists.
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Is Bel Fuse still cheap?
According to my relative valuation model, the stock seems to be currently fairly priced. 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 15.26x is currently trading slightly below its industry peers’ ratio of 19.06x, which means if you buy Bel Fuse today, you’d be paying a reasonable price for it. And if you believe that Bel Fuse should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because Bel Fuse’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.
Can we expect growth from Bel Fuse?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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 Bel Fuse, it is expected to deliver a relatively unexciting top-line growth of 2.5% 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 already priced in BELF.B’s growth outlook, with shares trading around its fair value. 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 BELF.B? Will you have enough conviction to buy should the price fluctuate below the true value?
Are you a potential investor? If you’ve been keeping tabs on BELF.B, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive growth outlook may mean 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 Bel Fuse. You can find everything you need to know about Bel Fuse in the latest infographic research report. If you are no longer interested in Bel Fuse, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.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. Thank you for reading.