Hawkins, Inc. (NASDAQ:HWKN), is not the largest company out there, but it led the NASDAQGS gainers with a relatively large price hike in the past couple of weeks. The recent share price gains has brought the company back closer to its yearly peak. As a US$2.7b market-cap stock, it seems odd Hawkins is not more well-covered by analysts. Although, there is more of an opportunity for mispricing in stocks with low coverage, 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 Hawkins’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Hawkins

What Is Hawkins Worth?

According to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. 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 Hawkins’s ratio of 33.23x is above its peer average of 22.23x, which suggests the stock is trading at a higher price compared to the Chemicals industry. Another thing to keep in mind is that Hawkins’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards the levels of its industry peers over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard for it to fall back down into an attractive buying range again.

What kind of growth will Hawkins generate?

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. Though in the case of Hawkins, it is expected to deliver a relatively unexciting earnings growth of 7.1%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for Hawkins, at least in the near term.

What This Means For You

Are you a shareholder? It seems like the market has well and truly priced in HWKN’s outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe HWKN 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 HWKN 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 positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Diving deeper into the forecasts for Hawkins mentioned earlier will help you understand how analysts view the stock going forward. At Simply Wall St, we have the analysts estimates which you can view by clicking here.

If you are no longer interested in Hawkins, 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.