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While The Goodyear Tire & Rubber Company (NASDAQ:GT) might not be the most widely known stock at the moment, it saw a double-digit share price rise of over 10% in the past couple of months on the NASDAQGS. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s examine Goodyear Tire & Rubber’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What Is Goodyear Tire & Rubber Worth?
Good news, investors! Goodyear Tire & Rubber is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Goodyear Tire & Rubber’s ratio of 4.09x is below its peer average of 15.34x, which indicates the stock is trading at a lower price compared to the Auto Components industry. What’s more interesting is that, Goodyear Tire & Rubber’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. 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 Goodyear Tire & Rubber look like?
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 Goodyear Tire & Rubber, it is expected to deliver a negative earnings growth of -7.8%, 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? Although GT is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to GT, 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 tabs on GT for some time, 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.
If you want to dive deeper into Goodyear Tire & Rubber, you'd also look into what risks it is currently facing. When we did our research, we found 2 warning signs for Goodyear Tire & Rubber (1 doesn't sit too well with us!) that we believe deserve your full attention.
If you are no longer interested in Goodyear Tire & Rubber, 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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