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Linamar Corporation (TSE:LNR), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the TSX over the last few months, increasing to CA$65.17 at one point, and dropping to the lows of CA$55.99. 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 Linamar's current trading price of CA$56.66 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 Linamar’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 Linamar
Is Linamar Still Cheap?
Good news, investors! Linamar is still a bargain right now according to our price multiple model, which compares 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 5.86x is currently well-below the industry average of 9.9x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, Linamar’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. 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 Linamar?
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. Though in the case of Linamar, it is expected to deliver a relatively unexciting top-line growth of 1.4% in the next few years, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.
What This Means For You
Are you a shareholder? Even though growth is relatively muted, since LNR is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as financial health to consider, which could explain the current price multiple.
Are you a potential investor? If you’ve been keeping an eye on LNR for a while, now might be the time to make a leap. Its future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy LNR. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed assessment.