Is Now An Opportune Moment To Examine Five Point Holdings, LLC (NYSE:FPH)?
Five Point Holdings, LLC (NYSE:FPH), is not the largest company out there, but it saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. Less-covered, small caps sees 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? Let’s take a look at Five Point Holdings’s outlook and value based on the most recent financial data to see if the opportunity still exists.
Check out our latest analysis for Five Point Holdings
What is Five Point Holdings worth?
According to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. 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 31.94x is currently well-above the industry average of 26.17x, 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. Since Five Point Holdings’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What kind of returns can we expect from Five Point Holdings in the future?
Valuation is only one aspect of forming your investment views on Five Point Holdings. Another thing to consider is whether it is actually a high-quality company. The best type of investment is always in a great company, producing robust returns at a cheap price. A way to assess stock quality is by looking how much it returns to you as the investor compared to how much you’re invested. Five Point Holdings is expected to return 12% of your investment in the upcoming year if you buy the stock today. This is a relatively good return on your investment which builds up the case for owning the stock.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in FPH’s high returns, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe FPH should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio 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 tabs on FPH for some time, 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 stock’s expected high return is encouraging for FPH, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Diving deeper into the forecasts for Five Point Holdings mentioned earlier will help you understand how analysts view the stock going forward. So feel free to check out our free graph representing analyst forecasts.
If you are no longer interested in Five Point Holdings, 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. 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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