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XPEL – Statistics say: short term opportunity is here

XPEL Inc is a provider of protective films and coatings, including automotive paint protection film, surface protection film, automotive and commercial/residential window films, and ceramic coatings.

The company has a network of trained installers and proprietary DAP software dedicated to exceeding customer expectations by providing quality products, customer service, technical support, and world-class training.

The company has significant investment potential in the long run, mainly due to its strong core business, strong, profitable ranking, and secure financial position. However, even though it is a stable-growth company, valuations are directly screaming, and the current extreme may signal the opposite situation. Short-term extremes say that with good risk management, it is possible to open a short position. However, I would like to point out in advance that this NOT investment advice, but only our analytical view, which is purely informative.

Extremes in many ways

From a statistical point of view, a very short-term opportunity may arise. The market is significantly overbought in the short term as well the medium term. So we can say that investing in this great company at current prices can bring a negative return in the coming months. XPEL traded for $ 10 a few months ago and is currently at around $ 82-83. Its profits and sales did not grow as significantly as the share price. Although the company has a strong financial position, just for this reason, we can say that such significant growth is unjustified from our point of view.

XPEL price chart Source: Tradingview

In the next graph, we can see that extreme situations occur on the daily chart. The market has been growing for 6 days in a row, while from a statistical point of view, after 5-7 days of continuous growth, a few percent decrease came about. The average nominal decline in USD is -7.8 USD after such corrections. So if we were to set a target from that point of view, it could be somewhere close to 75-77 USD. On the one hand, this is quite a conservative target, but on the other hand, you need to have stricter risk management, because you are trading against the main trend.

XPEL extremes Source: Patrik Mackovych | Walfir via Tradingview

In the next chart, we can see the medium term extreme in the form of the historically highest Price-to-Sales ratio, which is at the level of 12.4. This is significantly overshot. Moreover, a correction will likely come in the medium term. As for the percentage deviation from EMA 50 is not so significant. For this reason, too, we prefer a more conservative approach. Deviation from EMA 50 represents approximately 25% above the long term average, but not entirely in the reverse position. In this case, Price Action is excellent, as today's session opened with a significant gap, the stock grew by about 10%, but the bulls failed to maintain this growth. At the end of the session, it reaches only 1-2%, which is more negative in the short term.

PS and EMA deviation Source: Patrik Mackovych | Walfir via Tradingview

In summary, we can therefore say that the condition of short-term extremes has been met, so that in this case, from a statistical point of view, a short-term decline is more likely. However, again, we note that this analysis represents only our view and is not an investment advice.

WALFIR Technologies is one of the three divisions of WALFIR s.r.o., which is based in Slovakia. The primary interests of this division are analytical, quantitative, and algorithmic...

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