While urban-gro, Inc. (NASDAQ:UGRO) might not have the largest market cap around , it led the NASDAQCM gainers with a relatively large price hike in the past couple of weeks. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. As a small cap stock, which tends to lack high analyst coverage, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s examine urban-gro’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for urban-gro

What's The Opportunity In urban-gro?

According to our valuation model, urban-gro seems to be fairly priced at around 18.22% above our intrinsic value, which means if you buy urban-gro today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is $1.28, then there isn’t really any room for the share price grow beyond what it’s currently trading. Although, there may be an opportunity to buy in the future. This is because urban-gro’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

Can we expect growth from urban-gro?

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. With profit expected to grow by 67% over the next year, the near-term future seems bright for urban-gro. 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? UGRO’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. 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 the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping an eye on UGRO, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, 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.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example - urban-gro has 4 warning signs we think you should be aware of.

If you are no longer interested in urban-gro, 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.