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At NZ$3.01, Is It Time To Put Turners Automotive Group Limited (NZSE:TRA) On Your Watch List?

Simply Wall St
·3 min read

While Turners Automotive Group Limited (NZSE:TRA) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase on the NZSE 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? Today I will analyse the most recent data on Turners Automotive Group’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Turners Automotive Group

What's the opportunity in Turners Automotive Group?

Good news, investors! Turners Automotive Group is still a bargain right now according to my price multiple model, which compares 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 10.88x is currently well-below the industry average of 16.43x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, Turners Automotive Group’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. 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.

Can we expect growth from Turners Automotive Group?

earnings-and-revenue-growth
earnings-and-revenue-growth

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. 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. However, with a negative profit growth of -18% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Turners Automotive Group. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? Although TRA is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to TRA, 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 TRA for a while, but hesitant on making the leap, I recommend you research further into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Our analysis shows 4 warning signs for Turners Automotive Group (2 are significant!) and we strongly recommend you look at them before investing.

If you are no longer interested in Turners Automotive Group, 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.