While Genesco Inc. (NYSE:GCO) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase on the NYSE over the last few months. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Today I will analyse the most recent data on Genesco’s outlook and valuation to see if the opportunity still exists.
Is Genesco Still Cheap?
According to my valuation model, Genesco seems to be fairly priced at around 7.8% below my intrinsic value, which means if you buy Genesco today, you’d be paying a fair price for it. And if you believe the company’s true value is $36.40, then there isn’t much room for the share price grow beyond what it’s currently trading. So, is there another chance to buy low in the future? Given that Genesco’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 Genesco?
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 a relatively muted revenue growth of 3.2% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Genesco, at least in the short term.
What This Means For You
Are you a shareholder? GCO’s future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping an eye on GCO, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
If you'd like to know more about Genesco as a business, it's important to be aware of any risks it's facing. While conducting our analysis, we found that Genesco has 2 warning signs and it would be unwise to ignore these.
If you are no longer interested in Genesco, 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.