Is There Now An Opportunity In Gates Industrial Corporation plc (NYSE:GTES)?

Stock Analysis

While Gates Industrial Corporation plc (NYSE:GTES) might not be the most widely known stock at the moment, it saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s examine Gates Industrial’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Gates Industrial

Great news for investors – Gates Industrial is still trading at a fairly cheap price. According to my valuation, the intrinsic value for the stock is $18.16, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. However, given that Gates Industrial’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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

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. 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. Gates Industrial's earnings over the next few years are expected to increase by 25%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

Are you a shareholder? Since GTES is currently undervalued, it may be a great time to increase your holdings in the stock. With an optimistic 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 financial health to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on GTES for a while, now might be the time to enter the stock. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy GTES. 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 buy.

So while earnings quality is important, it's equally important to consider the risks facing Gates Industrial at this point in time. While conducting our analysis, we found that Gates Industrial has 1 warning sign and it would be unwise to ignore this.

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

Find out whether Gates Industrial is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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.

Gates Industrial Corporation plc manufactures and sells engineered power transmission and fluid power solutions worldwide.

Good value with acceptable track record.