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At US$115, Is Landstar System, Inc. (NASDAQ:LSTR) Worth Looking At Closely?

Simply Wall St

Landstar System, Inc. (NASDAQ:LSTR), which is in the transportation business, and is based in United States, saw its share price hover around a small range of US$109 to US$119 over the last few weeks. But is this actually reflective of the share value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Landstar System’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Landstar System

Is Landstar System still cheap?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 12% below my intrinsic value, which means if you buy Landstar System today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth $131.35, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because Landstar System’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 Landstar System look like?

NasdaqGS:LSTR Past and Future Earnings, January 22nd 2020
NasdaqGS:LSTR Past and Future Earnings, January 22nd 2020

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 -1.7% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Landstar System. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? Currently, LSTR appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on LSTR for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on LSTR should the price fluctuate below its true value.

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

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.

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. Thank you for reading.