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When Should You Buy ESCO Technologies Inc. (NYSE:ESE)?

Simply Wall St

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ESCO Technologies Inc. ( NYSE:ESE ), which is in the machinery business, and is based in United States, saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. Less-covered, small caps sees 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 ESCO Technologies’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for ESCO Technologies

Is ESCO Technologies still cheap?

According to my relative valuation model, the stock seems to be currently fairly priced. 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 ESCO Technologies’s ratio of 23.41x is trading slightly above its industry peers’ ratio of 20.15x, which means if you buy ESCO Technologies today, you’d be paying a relatively reasonable price for it. And if you believe that ESCO Technologies should be trading at this level in the long run, there’s only an insignificant downside when the price falls to its real value. Is there another opportunity to buy low in the future? Since ESCO Technologies’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 kind of growth will ESCO Technologies generate?

NYSE:ESE Past and Future Earnings, June 18th 2019

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. Though in the case of ESCO Technologies, it is expected to deliver a relatively unexciting earnings growth of 5.6%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for ESCO Technologies, at least in the near term.

What this means for you:

Are you a shareholder? It seems like the market has already priced in ESE’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 track record of its management team. Have these factors changed since the last time you looked at ESE? 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 ESE, 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 ESCO Technologies. You can find everything you need to know about ESCO Technologies in the latest infographic research report . If you are no longer interested in ESCO Technologies, 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 editorial-team@simplywallst.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.