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The Goodyear Tire & Rubber Company (NASDAQ:GT), is not the largest company out there, but it saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$24.12 and falling to the lows of US$15.78. 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 Goodyear Tire & Rubber's current trading price of US$16.01 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 Goodyear Tire & Rubber’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 Goodyear Tire & Rubber?
Goodyear Tire & Rubber appears to be overvalued by 22% at the moment, based on my discounted cash flow valuation. The stock is currently priced at US$16.01 on the market compared to my intrinsic value of $13.15. Not the best news for investors looking to buy! But, is there another opportunity to buy low in the future? Since Goodyear Tire & Rubber’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 kind of growth will Goodyear Tire & Rubber generate?
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. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Goodyear Tire & Rubber, at least in the near future.
What this means for you:
Are you a shareholder? If you believe GT 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 de-risk your portfolio. 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 an eye on GT for a while, now may not be the best time to enter into the stock. Price climbed passed its true value, in addition to a risky 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?
In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Be aware that Goodyear Tire & Rubber is showing 4 warning signs in our investment analysis and 1 of those makes us a bit uncomfortable...
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.
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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.