Bel Fuse Inc. (NASDAQ:BELF.A), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the NASDAQGS over the last few months. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? 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.
View our latest analysis for Bel Fuse
Is Bel Fuse still cheap?
According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 11.83x is currently trading slightly below its industry peers’ ratio of 15.98x, which means if you buy Bel Fuse today, you’d be paying a decent price for it. And if you believe Bel Fuse should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. Is there another opportunity to buy low in the future? Since Bel Fuse’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What does the future of Bel Fuse look like?
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. 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. However, with a relatively muted profit growth of 6.2% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Bel Fuse, at least in the short term.
What this means for you:
Are you a shareholder? It seems like the market has already priced in BELF.A’s growth outlook, with shares trading around industry price multiples. 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.A? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?