Yahoo Finance What Is Karat Packaging Inc.'s (NASDAQ:KRT) Share Price Doing?
Karat Packaging Inc. (NASDAQ:KRT), might not be a large cap stock, but it saw a significant share price rise of 23% in the past couple of months on the NASDAQGS. The company is inching closer to its yearly highs following the recent share price climb. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s examine Karat Packaging’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Check out our latest analysis for Karat Packaging
Is Karat Packaging Still Cheap?
The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. We’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 17.31x is currently trading slightly below its industry peers’ ratio of 18.41x, which means if you buy Karat Packaging today, you’d be paying a decent price for it. And if you believe that Karat Packaging should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Is there another opportunity to buy low in the future? Since Karat Packaging’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.
Can we expect growth from Karat Packaging?
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. With profit expected to grow by 27% over the next couple of years, the future seems bright for Karat Packaging. 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? KRT’s optimistic future growth appears to have been factored into the current share price, 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 KRT? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?
Are you a potential investor? If you’ve been keeping tabs on KRT, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for KRT, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
If you want to dive deeper into Karat Packaging, you'd also look into what risks it is currently facing. Case in point: We've spotted 1 warning sign for Karat Packaging you should be aware of.
If you are no longer interested in Karat Packaging, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
