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While La-Z-Boy Incorporated (NYSE:LZB) might not be the most widely known stock at the moment, 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 La-Z-Boy’s outlook and value based on the most recent financial data to see if the opportunity still exists.
What is La-Z-Boy worth?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 13% below my intrinsic value, which means if you buy La-Z-Boy today, you’d be paying a fair price for it. And if you believe the company’s true value is $46.95, then there’s not much of an upside to gain from mispricing. Is there another opportunity to buy low in the future? Since La-Z-Boy’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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 does the future of La-Z-Boy 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 87% over the next couple of years, the future seems bright for La-Z-Boy. 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 LZB’s positive outlook, 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 confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping an eye on LZB, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth further examining 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 La-Z-Boy, you'd also look into what risks it is currently facing. For example - La-Z-Boy has 3 warning signs we think you should be aware of.
If you are no longer interested in La-Z-Boy, 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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