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When Should You Buy Ituran Location and Control Ltd. (NASDAQ:ITRN)?

Ituran Location and Control Ltd. (NASDAQ:ITRN), is not the largest company out there, but it had a relatively subdued couple of weeks in terms of changes in share price, which continued to float around the range of US$21.00 to US$23.00. However, is this the true valuation level of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Ituran Location and Control’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Ituran Location and Control

Is Ituran Location and Control Still Cheap?

Good news, investors! Ituran Location and Control is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Ituran Location and Control’s ratio of 11.93x is below its peer average of 23.86x, which indicates the stock is trading at a lower price compared to the Communications industry. Although, there may be another chance to buy again in the future. This is because Ituran Location and Control’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.

What does the future of Ituran Location and Control look like?

earnings-and-revenue-growth
earnings-and-revenue-growth

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 37% over the next couple of years, the future seems bright for Ituran Location and Control. 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? Since ITRN is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With an optimistic profit outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on ITRN for a while, now might be the time to enter the stock. Its buoyant future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy ITRN. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.

So while earnings quality is important, it's equally important to consider the risks facing Ituran Location and Control at this point in time. For example - Ituran Location and Control has 1 warning sign we think you should be aware of.

If you are no longer interested in Ituran Location and Control, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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