Why Lookers plc (LSE:LOOK) Could Be A Buy
Lookers plc (LSE:LOOK), a retailing company based in United Kingdom, saw significant share price volatility over the past couple of months on the LSE, rising to the highs of £1.23 and falling to the lows of £1.07. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether LOOK's current trading price of £1.14 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at LOOK’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. View our latest analysis for Lookers
What's the opportunity in LOOK?
Great news for investors – LOOK is still trading at a fairly cheap price. According to my valuation, the intrinsic value for the stock is £2.53 which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. Another thing to keep in mind is that LOOK’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.
What does the future of LOOK look like?
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 LOOK future expectations. However, with a negative profit growth of -13.69% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for LOOK. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? Although LOOK is currently undervalued, the negative outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to LOOK, 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 LOOK for some time, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Lookers. You can find everything you need to know about LOOK in the latest infographic research report. If you are no longer interested in Lookers, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
