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What Does Inchcape plc's (LON:INCH) Share Price Indicate?

Simply Wall St

Inchcape plc (LON:INCH), which is in the retail distributors business, and is based in United Kingdom, received a lot of attention from a substantial price movement on the LSE over the last few months, increasing to UK£7.20 at one point, and dropping to the lows of UK£6.33. 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 Inchcape's current trading price of UK£6.33 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Inchcape’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Inchcape

What's the opportunity in Inchcape?

Great news for investors – Inchcape is still trading at a fairly cheap price. My valuation model shows that the intrinsic value for the stock is £8.08, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. Inchcape’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

Can we expect growth from Inchcape?

LSE:INCH Past and Future Earnings, February 24th 2020

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. Inchcape’s earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? Since INCH is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on INCH for a while, now might be the time to make a leap. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy INCH. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed buy.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Inchcape. You can find everything you need to know about Inchcape in the latest infographic research report. If you are no longer interested in Inchcape, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.