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Should You Think About Buying Lincoln Educational Services Corporation (NASDAQ:LINC) Now?

·3 min read

While Lincoln Educational Services Corporation (NASDAQ:LINC) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase on the NASDAQGS 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 take a look at Lincoln Educational Services’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Lincoln Educational Services

What is Lincoln Educational Services worth?

Great news for investors – Lincoln Educational Services is still trading at a fairly cheap price according to my price multiple model, where I compare 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 8.36x is currently well-below the industry average of 19.53x, meaning that it is trading at a cheaper price relative to its peers. Lincoln Educational Services’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

What kind of growth will Lincoln Educational Services generate?

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 -10.0% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Lincoln Educational Services. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? Although LINC 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 LINC, 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 LINC 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.

So while earnings quality is important, it's equally important to consider the risks facing Lincoln Educational Services at this point in time. In terms of investment risks, we've identified 2 warning signs with Lincoln Educational Services, and understanding these should be part of your investment process.

If you are no longer interested in Lincoln Educational Services, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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