In This Article:
Universal Store Holdings Limited (ASX:UNI), is not the largest company out there, but it received a lot of attention from a substantial price increase on the ASX over the last few months. The company is now trading at yearly-high levels following the recent surge in its share price. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s take a look at Universal Store Holdings’s outlook and value based on the most recent financial data to see if the opportunity still exists.
View our latest analysis for Universal Store Holdings
What's The Opportunity In Universal Store Holdings?
According to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Universal Store Holdings’s ratio of 17.2x is trading slightly below its industry peers’ ratio of 17.32x, which means if you buy Universal Store Holdings today, you’d be paying a decent price for it. And if you believe Universal Store 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. Is there another opportunity to buy low in the future? Since Universal Store Holdings’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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.
Can we expect growth from Universal Store 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. Universal Store Holdings' earnings over the next few years are expected to increase by 36%, 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? UNI’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at UNI? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?