Smith & Wesson Brands, Inc. (NASDAQ:SWBI), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$11.16 at one point, and dropping to the lows of US$9.35. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Smith & Wesson Brands' current trading price of US$9.35 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Smith & Wesson Brands’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

What Is Smith & Wesson Brands Worth?

The stock seems fairly valued at the moment according to our valuation model. It’s trading around 16% below our intrinsic value, which means if you buy Smith & Wesson Brands today, you’d be paying a reasonable price for it. And if you believe the company’s true value is $11.16, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because Smith & Wesson Brands’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.

View our latest analysis for Smith & Wesson Brands

Can we expect growth from Smith & Wesson Brands?

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. However, with an extremely negative double-digit change in profit expected next year, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Smith & Wesson Brands, at least in the near future.

What This Means For You

Are you a shareholder? SWBI seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on SWBI for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on SWBI should the price fluctuate below its true value.

So while earnings quality is important, it's equally important to consider the risks facing Smith & Wesson Brands at this point in time. Case in point: We've spotted 3 warning signs for Smith & Wesson Brands you should be mindful of and 1 of these is a bit unpleasant.

If you are no longer interested in Smith & Wesson Brands, 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.