VirTra, Inc. (NASDAQ: VTSI), may not be a large cap stock, but it has received a lot of attention due to a substantial increase in NASDAQCM prices in recent months. As a small cap stock, which tends to lack high analyst coverage, there is usually more opportunity for bad valuation because there is less activity to bring the stock closer to its fair value. Is there still an opportunity here to buy? Today I will analyze the most recent data on the outlook and valuation of VirTra to see if the opportunity still exists.

See our latest review for VirTra

Is VirTra still cheap?

Great news for investors – VirTra is still trading fairly cheaply under my multiple pricing model, where I compare the company’s price-to-earnings ratio to the industry average. In this case, I used the price-to-earnings (PE) ratio since there isn’t enough information to reliably forecast the stock’s cash flow. I find VirTra’s ratio of 20.59x to be lower than its peer average of 34.23x, indicating that the stock is trading at a lower price than the aerospace industry and the defense. What’s more interesting is that the VirTra share price is quite volatile, which gives us more chances to buy as the stock price could go down (or up) in the future. This is based on its high beta, which is a good indicator of how the stock is moving relative to the rest of the market.

What does the future of VirTra look like?

Future prospects are an important aspect when considering buying a stock, especially if you are an investor looking to grow your portfolio. Buying a large business with a solid outlook for a cheap price is always a good investment, so let’s take a look at the future expectations of the business as well. Although in the case of VirTra it is expected to post negative earnings growth of -4.8%, which does not help to strengthen its investment thesis. The risk of future uncertainty appears to be high, at least in the short term.

What this means for you:

Are you a shareholder? Although VTSI is currently trading below the industry PE ratio, the unfavorable prospect of negative growth carries a certain degree of risk. I recommend that you think about whether you want to increase your portfolio’s exposure to VTSI or whether diversifying into another stock may be a better solution for your total risk and return.

Are you a potential investor? If you’ve been keeping your eye on VTSI for a while, but hesitant to take the leap, I recommend that you do some more research on the stock. Given its current price multiple, now is the time to make a decision. But keep in mind the risks that come with negative growth prospects going forward.

In light of this, if you want to do more analysis on the business, it is essential to be aware of the risks involved. For example, we have identified 4 warning signs for VirTra (1 is of concern) that you should know about.

If you are no longer interested in VirTra, you can use our free platform to view our list of over 50 other high growth potential stocks.

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This Simply Wall St article is general in nature. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative material. Simply Wall St has no position in any of the stocks mentioned.
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