Gentherm Incorporated (NASDAQ:THRM), is not the largest company out there, but it received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$50.78 at one point, and dropping to the lows of US$40.30. 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 Gentherm's current trading price of US$42.10 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 Gentherm's outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

What's The Opportunity In Gentherm?

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. 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 Gentherm's ratio of 19.26x is trading slightly below its industry peers' ratio of 19.36x, which means if you buy Gentherm today, you'd be paying a reasonable price for it. And if you believe Gentherm should be trading in this range, then there isn't much room for the share price to grow beyond the levels of other industry peers over the long-term. Although, there may be an opportunity to buy in the future. This is because Gentherm'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 Gentherm?

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. Gentherm's earnings over the next few years are expected to increase by 58%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? It seems like the market has already priced in THRM's positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven't considered today, such as the track record of its management team. Have these factors changed since the last time you looked at THRM? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you've been keeping an eye on THRM, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for THRM, 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.

It can be quite valuable to consider what analysts expect for Gentherm from their most recent forecasts. At Simply Wall St, we have the analysts estimates which you can view by clicking here.

If you are no longer interested in Gentherm, 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.