Coats Group plc (LSE:COA), a textiles, apparel and luxury goods company based in United Kingdom, received a lot of attention from a substantial price increase on the LSE in the over the last few months. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s examine COA’s valuation and outlook in more detail to determine if there’s still a bargain opportunity. See our latest analysis for COA
What is COA worth?
COA appears to be overvalued by 41% at the moment, based on my discounted cash flow valuation. Not the best news for investors looking to buy! The intrinsic value of the stock is $0.62, but it is currently valued by the market at $0.88. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that COA’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 COA?
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. 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. COA’s earnings over the next few years are expected to increase by 25.15%, 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? It seems like the market has well and truly priced in COA’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe COA should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. 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 tabs on COA for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for COA, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.