Willdan Group, Inc. (NASDAQ:WLDN), might not be a large cap stock, but it saw a significant share price rise of 32% in the past couple of months on the NASDAQGM. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let's take a look at Willdan Group's outlook and value based on the most recent financial data to see if the opportunity still exists.

What Is Willdan Group Worth?

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. We've used the price-to-earnings ratio in this instance because there's not enough visibility to forecast its cash flows. The stock's ratio of 26.76x is currently trading slightly below its industry peers' ratio of 27.42x, which means if you buy Willdan Group today, you'd be paying a decent price for it. And if you believe that Willdan Group should be trading at this level in the long run, then there's not much of an upside to gain over and above other industry peers. So, is there another chance to buy low in the future? Given that Willdan Group's share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Willdan Group 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. 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 a relatively muted profit growth of 0.6% expected over the next couple of years, growth doesn't seem like a key driver for a buy decision for Willdan Group, at least in the short term.

What This Means For You

Are you a shareholder? It seems like the market has already priced in WLDN's growth 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 WLDN? 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 tabs on WLDN, now may not be the most optimal time to buy, given it is trading around industry price multiples. 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.

So while earnings quality is important, it's equally important to consider the risks facing Willdan Group at this point in time. In terms of investment risks, we've identified 1 warning sign with Willdan Group, and understanding this should be part of your investment process.

If you are no longer interested in Willdan Group, 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.