When Should You Buy Natural Grocers by Vitamin Cottage Inc (NYSE:NGVC)?
Natural Grocers by Vitamin Cottage Inc (NYSE:NGVC), a consumer retailing company based in United States, saw a significant share price rise of over 20% in the past couple of months on the NYSE. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on Natural Grocers by Vitamin Cottage’s outlook and valuation to see if the opportunity still exists. Check out our latest analysis for Natural Grocers by Vitamin Cottage
What’s the opportunity in Natural Grocers by Vitamin Cottage?
According to my relative valuation model, the stock seems to be currently fairly priced. I’ve used the price-to-equity ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 26.69x is currently trading slightly above its industry peers’ ratio of 23.44x, which means if you buy Natural Grocers by Vitamin Cottage today, you’d be paying a relatively fair price for it. And if you believe that Natural Grocers by Vitamin Cottage should be trading at this level in the long run, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because Natural Grocers by Vitamin Cottage’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will Natural Grocers by Vitamin Cottage generate?
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. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Natural Grocers by Vitamin Cottage, at least in the near future.
What this means for you:
Are you a shareholder? Currently, Natural Grocers by Vitamin Cottage appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on Natural Grocers by Vitamin Cottage, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on Natural Grocers by Vitamin Cottage for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on Natural Grocers by Vitamin Cottage should the price fluctuate below its true value.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Natural Grocers by Vitamin Cottage. You can find everything you need to know about Natural Grocers by Vitamin Cottage in the latest infographic research report. If you are no longer interested in Natural Grocers by Vitamin Cottage, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
