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Should You Think About Buying General Finance Corporation (NASDAQ:GFN) Now?

Dane Simmons

General Finance Corporation (NASDAQ:GFN), which is in the trade distributors business, and is based in United States, saw a decent share price growth in the teens level on the NasdaqGM over the last few months. 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 examine General Finance’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for General Finance

What’s the opportunity in General Finance?

According to my valuation model, General Finance seems to be fairly priced at around 4.22% above my intrinsic value, which means if you buy General Finance today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is $9.68, 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 General Finance’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 General Finance generate?

NasdaqGM:GFN Future Profit January 2nd 19
NasdaqGM:GFN Future Profit January 2nd 19

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. Though in the case of General Finance, it is expected to deliver a relatively unexciting top-line growth of 7.1% in the next few years, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.

What this means for you:

Are you a shareholder? It seems like the market has already priced in GFN’s future outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping an eye on GFN, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook 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.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on General Finance. You can find everything you need to know about General Finance in the latest infographic research report. If you are no longer interested in General Finance, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

To help readers see past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.