Should I buy Snap-on as CEO issues upbeat assessment on the economy?
- Snap-on shares have pulled back more than 8% since the start of last week.
- The stock gained 53% between January and June 4, before its latest pullback.
- The company CEO remains upbeat on the outlook in the post-covid period. Is it time to buy SNA stock?
The global tools and equipment manufacturer Snap-on Inc. (NYSE:SNA) shares have pulled back in recent trading sessions to trade at around $235 per share. The company rallied more than 53% between January and June 4 before the latest decline. Company CEO Nicholas Pinchuk told CNBC that he remains upbeat about the outlook despite increasing inflation fears. Pinchuk said,
People are hearing an all-clear; everyone knows how it is going to finish
Is Snap-on a buy after pullback?
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Snap-on is one of the leading manufacturers of tools and accessories, making it a quality stock to own. The recent pullback in the stock price valued SNA at an attractive price-earnings ratio of 18.75. However, expected earnings growth projections are low, which means there is nothing much to look forward to this year.
The company’s CEO’s view that the post-covid period will boost outlook is dependent on how quickly the world returns to normal. Although various countries have re-opened their economies, they still operate under strict guidelines to avoid a resurgence of the pandemic.
It could be a bottleneck in Snap-on’s growth outlook.
SNA’s forward price-earnings ratio of 16.69 could attract more bullish investors to buy the stock in light of Pinchuk’s comments. The company delivered an EPS surprise of 14.56% in its most recent quarterly results. It may have to post a few more earnings surprises to justify Pnichuk’s upbeat outlook. But for now, the EPS is expected to fall by 7.80% this year before bouncing back by 5% next year.
Technically, SNA shares appear to be trading within an ascending channel formation in the daily chart. The stock recently pulled back to move closer to the oversold level of the 14-day RSI. It could trigger a short-term rebound.
However, the stock looks far from touching the trendline support and the 100-day moving average below, which leaves room for more downward movement.
Investors can target short-term rebound profits at around $246.16 and $259.54. On the other hand, investors looking to short the stock can target extended pullbacks at $225.52 and $213.26.
Bottom line: Snap-on could decline further before bouncing back
In summary, Snap-on stock looks attractively valued based on the current price-earings ratio. However, the company seems poised for an earnings squeeze this year, according to estimates. Therefore, the recent downward movement could continue before the stock finds support.
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