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Is It Too Late To Consider Buying Linamar Corporation (TSE:LNR)?

Simply Wall St

Linamar Corporation (TSE:LNR), which is in the auto components business, and is based in Canada, received a lot of attention from a substantial price movement on the TSX over the last few months, increasing to CA$46.19 at one point, and dropping to the lows of CA$36.74. 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 Linamar's current trading price of CA$40.40 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 Linamar’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Linamar

What is Linamar worth?

According to my valuation model, the stock is currently overvalued by about 40%, trading at CA$40.40 compared to my intrinsic value of CA$28.89. This means that the buying opportunity has probably disappeared for now. But, is there another opportunity to buy low in the future? Since Linamar’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. 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.

What does the future of Linamar look like?

TSX:LNR Past and Future Earnings, October 13th 2019

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Though in the case of Linamar, it is expected to deliver a negative earnings growth of -8.1%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What this means for you:

Are you a shareholder? If you believe LNR is currently trading above its value, selling high and buying it back up again when its price falls towards its real value can be profitable. Given the risk from a negative growth outlook, this could be the right time to reduce your total portfolio risk. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on LNR for some time, now may not be the best time to enter into the stock. Its price has risen beyond its true value, on top of a negative future outlook. However, there are also other important factors which we haven’t considered today, such as the track record of its management. Should the price fall in the future, will you be well-informed enough to buy?

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Linamar. You can find everything you need to know about Linamar in the latest infographic research report. If you are no longer interested in Linamar, 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 editorial-team@simplywallst.com. 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.