Live Oak Bancshares Inc (NASDAQ:LOB), operating in the financial services industry based in United States, saw a decent share price growth in the teens level on the NasdaqGS over the last few months. As a small cap stock, hardly covered by any analysts, 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 Live Oak Bancshares’s outlook and value based on the most recent financial data to see if the opportunity still exists. Check out our latest analysis for Live Oak Bancshares
Is Live Oak Bancshares still cheap?
Good news, investors! Live Oak Bancshares is still a bargain right now. In this instance, I’ve used the price-to-equity (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Live Oak Bancshares’s ratio of 10.98x is below its peer average of 16.99x, which suggests the stock is undervalued compared to the Banks industry. What’s more interesting is that, Live Oak Bancshares’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to move to its intrinsic value, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
What kind of growth will Live Oak Bancshares generate?
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 an extremely negative double-digit change in profit expected next year, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Live Oak Bancshares, at least in the near future.
What this means for you:
Are you a shareholder? Although LOB is currently undervalued, the negative 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 LOB, 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 an eye on LOB for a while, but hesitant on making the leap, I recommend you research further into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Live Oak Bancshares. You can find everything you need to know about Live Oak Bancshares in the latest infographic research report. If you are no longer interested in Live Oak Bancshares, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.