Over the next 6 years, Insteel Industries shares will need to reach $62 to achieve average annual stock market performance of 9.0%. Upper quartile performance will require a $73 Insteel Industries stock price by 2029. As reflected at the current price of $37, what future Insteel Industries operating performance is the market anticipating?
Executive Summary
- Insteel Industries’ important characteristics: below average expected growth, instability, very low profitability, and low financial strength.
- Average valuation, above market shareholder returns. Current valuation levels are average relative to the Insteel Industries Peer Group. Recent market returns have outperformed the Insteel Industries Peer Group. Total shareholder returns expected to significantly beat the overall equity market. Based on current investor expectations, Insteel Industries shares should reach a level of $68 by 2029 — an 17.6% per year total shareholder return. A 2029 stock price of $62 would reflect median performance and a price of $73 would be required to reach upper quartile performance.
- Insteel Industries’ historical growth is slightly below average. Historical growth has been below average relative to the Insteel Industries Peer Group and forecasted growth is relatively average. EPS Growth has lagged. This factor has negatively affected market perceptions of Insteel Industries. Insteel Industries’ historical income statement growth and balance sheet growth have diverged. Revenue growth has paralleled asset growth; earnings growth has fallen short of equity growth driving erosion in return on equity. Insteel Industries’ consensus growth expectations are lower than historical growth.
- Return on Equity, and Pretax Margin are group lagging. These factors have negatively affected market perceptions of Insteel Industries. The company has very low cash and will have to work to generate attractive investments and improve valuation.
- Insteel Industries’ risk profile is neutral. Overall variability has been above average with above average revenue variability, very high E.P.S. variability, and very low stock price volatility. Financial Strength is very low and earnings’ expectations are relatively high. The debt/capital ratio has declined.
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