Is Legacy Housing Corporation (NASDAQ:LEGH) Potentially Undervalued?
Legacy Housing Corporation (NASDAQ:LEGH), is not the largest company out there, but it saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$20.08 and falling to the lows of US$16.80. 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 Legacy Housing's current trading price of US$17.75 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 Legacy Housing’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 Legacy Housing
Is Legacy Housing still cheap?
The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. 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 10.64x is currently trading in-line with its industry peers’ ratio, which means if you buy Legacy Housing today, you’d be paying a relatively reasonable price for it. So, is there another chance to buy low in the future? Given that Legacy Housing’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.
What does the future of Legacy Housing look like?
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. With profit expected to grow by a double-digit 12% in the upcoming year, the short-term outlook is positive for Legacy Housing. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? It seems like the market has already priced in LEGH’s positive outlook, with shares trading around industry price multiples. 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 LEGH? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?
Are you a potential investor? If you’ve been keeping an eye on LEGH, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for LEGH, which 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 want to dive deeper into Legacy Housing, you'd also look into what risks it is currently facing. Case in point: We've spotted 1 warning sign for Legacy Housing you should be aware of.
If you are no longer interested in Legacy Housing, 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.
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