Should You Investigate Cavco Industries, Inc. (NASDAQ:CVCO) At US$199?
Cavco Industries, Inc. (NASDAQ:CVCO), which is in the consumer durables business, and is based in United States, maintained its current share price over the past couple of month on the NASDAQGS, with a relatively tight range of US$188 to US$206. However, does this price actually reflect the true value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Cavco Industries’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 Cavco Industries
Is Cavco Industries still cheap?
Cavco Industries is currently overpriced based on my relative valuation model. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 23.99x is currently well-above the industry average of 13.49x, meaning that it is trading at a more expensive price relative to its peers. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Cavco Industries’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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from Cavco Industries?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. However, with a relatively muted profit growth of 8.8% expected over the next year, growth doesn’t seem like a key driver for a buy decision for Cavco Industries, at least in the short term.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in CVCO’s outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe CVCO should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on CVCO for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Cavco Industries. You can find everything you need to know about Cavco Industries in the latest infographic research report. If you are no longer interested in Cavco Industries, 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.
