While MSA Safety Incorporated (NYSE:MSA) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$171 at one point, and dropping to the lows of US$155. 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 MSA Safety's current trading price of US$162 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at MSA Safety’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What's the opportunity in MSA Safety?
MSA Safety is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison to the industry average. 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 55.83x is currently well-above the industry average of 35.39x, meaning that it is trading at a more expensive price relative to its peers. Furthermore, MSA Safety’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach levels around its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
What kind of growth will MSA Safety generate?NYSE:MSA Earnings and Revenue Growth July 27th 2021
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. In the upcoming year, MSA Safety's earnings are expected to increase by 63%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in MSA’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe MSA should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on MSA for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for MSA, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
If you'd like to know more about MSA Safety as a business, it's important to be aware of any risks it's facing. At Simply Wall St, we found 2 warning signs for MSA Safety and we think they deserve your attention.
If you are no longer interested in MSA Safety, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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. 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.