What Does Covenant Logistics Group, Inc.'s (NASDAQ:CVLG) Share Price Indicate?
Covenant Logistics Group, Inc. (NASDAQ:CVLG), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the NASDAQGS over the last few months. As a small cap stock, which tends to lack high analyst coverage, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s take a look at Covenant Logistics Group’s outlook and value based on the most recent financial data to see if the opportunity still exists.
Check out our latest analysis for Covenant Logistics Group
What is Covenant Logistics Group worth?
Great news for investors – Covenant Logistics Group is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. 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 Covenant Logistics Group’s ratio of 4.82x is below its peer average of 10.21x, which indicates the stock is trading at a lower price compared to the Transportation industry. Although, there may be another chance to buy again in the future. This is because Covenant Logistics Group’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.
Can we expect growth from Covenant Logistics Group?
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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Though in the case of Covenant Logistics Group, it is expected to deliver a negative earnings growth of -13%, 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? Although CVLG is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. I recommend you think about whether you want to increase your portfolio exposure to CVLG, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping tabs on CVLG for some time, but hesitant on making the leap, I recommend you research further into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. In terms of investment risks, we've identified 1 warning sign with Covenant Logistics Group, and understanding it should be part of your investment process.
If you are no longer interested in Covenant Logistics Group, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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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.
