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Lear Corporation (NYSE:LEA), which is in the auto components business, and is based in United States, received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to $157.83 at one point, and dropping to the lows of $119.03. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Lear's current trading price of $119.03 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Lear’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What's the opportunity in Lear?
Good news, investors! Lear is still a bargain right now. My valuation model shows that the intrinsic value for the stock is $186.61, but it is currently trading at US$119 on the share market, meaning that there is still an opportunity to buy now. Although, there may be another chance to buy again in the future. This is because Lear’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 does the future of Lear look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 grow by 23% over the next couple of years, the future seems bright for Lear. 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? Since LEA is currently undervalued, it may be a great time to increase your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on LEA for a while, now might be the time to enter the stock. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy LEA. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed buy.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Lear. You can find everything you need to know about Lear in the latest infographic research report. If you are no longer interested in Lear, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.