Why Johnson Outdoors Inc. (NASDAQ:JOUT) Could Be Worth Watching

·3 min read

Johnson Outdoors Inc. (NASDAQ:JOUT), is not the largest company out there, but it saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$84.89 and falling to the lows of US$60.54. 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 Johnson Outdoors' current trading price of US$60.54 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 Johnson Outdoors’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Johnson Outdoors

What's the opportunity in Johnson Outdoors?

The share price seems sensible at the moment according to my price multiple model, where I compare 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 Johnson Outdoors’s ratio of 10.81x is trading slightly above its industry peers’ ratio of 9.74x, which means if you buy Johnson Outdoors today, you’d be paying a relatively reasonable price for it. And if you believe that Johnson Outdoors should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Furthermore, Johnson Outdoors’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

What kind of growth will Johnson Outdoors generate?

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earnings-and-revenue-growth

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. Though in the case of Johnson Outdoors, it is expected to deliver a relatively unexciting earnings growth of 8.6%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for Johnson Outdoors, at least in the near term.

What this means for you:

Are you a shareholder? It seems like the market has already priced in JOUT’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 financial strength of the company. Have these factors changed since the last time you looked at JOUT? 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 JOUT, 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 if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. To that end, you should learn about the 4 warning signs we've spotted with Johnson Outdoors (including 1 which can't be ignored).

If you are no longer interested in Johnson Outdoors, 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.