Should You Think About Buying Tomra Systems ASA (OB:TOM) Now?
While Tomra Systems ASA (OB:TOM) might not have the largest market cap around , it saw a double-digit share price rise of over 10% in the past couple of months on the OB. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Tomra Systems’s outlook and value based on the most recent financial data to see if the opportunity still exists.
Is Tomra Systems Still Cheap?
Tomra Systems is currently expensive based on our price multiple model, where we look at the company's price-to-earnings ratio in comparison to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Tomra Systems’s ratio of 33.09x is above its peer average of 24.84x, which suggests the stock is trading at a higher price compared to the Machinery industry. But, is there another opportunity to buy low in the future? Since Tomra Systems’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. 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.
Check out our latest analysis for Tomra Systems
What does the future of Tomra Systems 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. 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. Tomra Systems' earnings over the next few years are expected to increase by 87%, 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 TOM’s positive outlook, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe TOM 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 an eye on TOM for a while, 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 optimistic prospect is encouraging for TOM, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
If you want to dive deeper into Tomra Systems, you'd also look into what risks it is currently facing. Case in point: We've spotted 1 warning sign for Tomra Systems you should be aware of.
If you are no longer interested in Tomra Systems, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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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.