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Varex Imaging Corporation (NASDAQ:VREX), is not the largest company out there, but it saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$30.64 and falling to the lows of US$20.58. 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 Varex Imaging's current trading price of US$20.73 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 Varex Imaging’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 Varex Imaging
What is Varex Imaging worth?
Good news, investors! Varex Imaging is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. 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 Varex Imaging’s ratio of 32.61x is below its peer average of 38.74x, which indicates the stock is trading at a lower price compared to the Medical Equipment industry. Another thing to keep in mind is that Varex Imaging’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its industry peers, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.
What kind of growth will Varex Imaging generate?
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. With profit expected to grow by 46% over the next year, the near-term future seems bright for Varex Imaging. 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? Since VREX is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With an optimistic profit outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.