Yahoo Finance When Should You Buy Lithia Motors, Inc. (NYSE:LAD)?
Lithia Motors, Inc. (NYSE:LAD), is not the largest company out there, but it received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$310 at one point, and dropping to the lows of US$248. 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 Lithia Motors' current trading price of US$267 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 Lithia Motors’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 Lithia Motors
Is Lithia Motors Still Cheap?
Great news for investors – Lithia Motors is still trading at a fairly cheap price according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 7.82x is currently well-below the industry average of 15.79x, meaning that it is trading at a cheaper price relative to its peers. However, given that Lithia Motors’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from Lithia Motors?
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. Lithia Motors' earnings over the next few years are expected to increase by 33%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? Since LAD is currently below the industry PE ratio, it may be a great time to increase your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.
Are you a potential investor? If you’ve been keeping an eye on LAD for a while, now might be the time to make a leap. Its buoyant future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy LAD. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed assessment.
Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. While conducting our analysis, we found that Lithia Motors has 1 warning sign and it would be unwise to ignore it.
If you are no longer interested in Lithia Motors, 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.
