Yahoo Finance What Is CLS Holdings plc's (LON:CLI) Share Price Doing?
While CLS Holdings plc (LON:CLI) 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 LSE. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s take a look at CLS Holdings’s outlook and value based on the most recent financial data to see if the opportunity still exists.
View our latest analysis for CLS Holdings
What's the opportunity in CLS Holdings?
The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’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 10.06x is currently trading slightly below its industry peers’ ratio of 14.94x, which means if you buy CLS Holdings today, you’d be paying a reasonable price for it. And if you believe CLS Holdings should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. In addition to this, it seems like CLS Holdings’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.
Can we expect growth from CLS Holdings?
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. CLS Holdings' earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has already priced in CLI’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at CLI? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?
Are you a potential investor? If you’ve been keeping tabs on CLI, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for CLI, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. To that end, you should learn about the 4 warning signs we've spotted with CLS Holdings (including 1 which is a bit unpleasant).
If you are no longer interested in CLS Holdings, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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. 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.
