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Luceco plc (LON:LUCE), might not be a large cap stock, but it saw significant share price movement during recent months on the LSE, rising to highs of UK£2.65 and falling to the lows of UK£1.26. 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 Luceco's current trading price of UK£1.31 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Luceco’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 Luceco
What is Luceco worth?
Great news for investors – Luceco is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Luceco’s ratio of 7.44x is below its peer average of 29.38x, which indicates the stock is trading at a lower price compared to the Electrical industry. What’s more interesting is that, Luceco’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 Luceco?
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. 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. With revenues expected to grow by a double-digit 19% over the next couple of years, the outlook is positive for Luceco. If the level of expenses is able to be maintained, it looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? Since LUCE is currently trading 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 financial health to consider, which could explain the current price multiple.