Smith & Wesson Brands, Inc. (NASDAQ:SWBI), might not be a large cap stock, but it saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$14.98 and falling to the lows of US$10.86. 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$10.86 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?

Good news, investors! Smith & Wesson Brands is still a bargain right now according to our price multiple model, which compares the company's price-to-earnings ratio to the industry average. 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 Smith & Wesson Brands's ratio of 13.27x is below its peer average of 17.43x, which indicates the stock is trading at a lower price compared to the Leisure industry. Smith & Wesson Brands's share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it's there, it may be hard to fall back down into an attractive buying range.

What does the future of Smith & Wesson Brands look like?

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. 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? Although SWBI is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to SWBI, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you've been keeping tabs on SWBI for some time, but hesitant on making the leap, we recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Be aware that Smith & Wesson Brands is showing 2 warning signs in our investment analysis and 1 of those makes us a bit uncomfortable...

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.