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What Does The Buckle, Inc.'s (NYSE:BKE) Share Price Indicate?

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The Buckle, Inc. (NYSE:BKE), is not the largest company out there, but it saw significant share price movement during recent months on the NYSE, rising to highs of US$50.14 and falling to the lows of US$39.25. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Buckle's current trading price of US$39.87 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Buckle’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Buckle

What's the opportunity in Buckle?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Buckle’s ratio of 9.02x is trading slightly below its industry peers’ ratio of 9.8x, which means if you buy Buckle today, you’d be paying a decent price for it. And if you believe that Buckle should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. So, is there another chance to buy low in the future? Given that Buckle’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from Buckle?

earnings-and-revenue-growth
earnings-and-revenue-growth

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Though in the case of Buckle, it is expected to deliver a negative earnings growth of -5.3%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What this means for you:

Are you a shareholder? Currently, BKE appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on BKE, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on BKE for a while, now may not be the most advantageous time to buy, given it is trading around industry price multiples. This 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 crystallize your views on BKE should the price fluctuate below the industry PE ratio.

So while earnings quality is important, it's equally important to consider the risks facing Buckle at this point in time. Every company has risks, and we've spotted 4 warning signs for Buckle (of which 1 is concerning!) you should know about.

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

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.