While TAT Technologies Ltd. (NASDAQ:TATT) might not have the largest market cap around , it saw a significant share price rise of 54% in the past couple of months on the NASDAQGM. The company is inching closer to its yearly highs following the recent share price climb. 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 examine TAT Technologies’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for TAT Technologies

What's The Opportunity In TAT Technologies?

According to our 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. 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 34.94x is currently trading slightly above its industry peers’ ratio of 33.07x, which means if you buy TAT Technologies today, you’d be paying a relatively sensible price for it. And if you believe TAT Technologies should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. Furthermore, TAT Technologies’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

What kind of growth will TAT Technologies generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. With profit expected to grow by 55% over the next year, the near-term future seems bright for TAT Technologies. 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? TATT’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 TATT? 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 an eye on TATT, 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 TATT, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you'd like to know more about TAT Technologies as a business, it's important to be aware of any risks it's facing. For example - TAT Technologies has 1 warning sign we think you should be aware of.

If you are no longer interested in TAT Technologies, 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.