Ethan Allen Interiors Inc. (NYSE:ETH), is not the largest company out there, but it saw a significant share price rise of over 20% in the past couple of months on the NYSE. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Ethan Allen Interiors’s outlook and value based on the most recent financial data to see if the opportunity still exists.
Is Ethan Allen Interiors still cheap?
According to my valuation model, Ethan Allen Interiors seems to be fairly priced at around 10.11% above my intrinsic value, which means if you buy Ethan Allen Interiors today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth $15.19, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because Ethan Allen Interiors’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will Ethan Allen Interiors 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. With profit expected to more than double over the next couple of years, the future seems bright for Ethan Allen Interiors. 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 ETH’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 tabs on ETH, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, 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 Ethan Allen Interiors, you'd also look into what risks it is currently facing. For example - Ethan Allen Interiors has 3 warning signs we think you should be aware of.
If you are no longer interested in Ethan Allen Interiors, 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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