Inchcape plc (LON:INCH), is not the largest company out there, but it saw significant share price movement during recent months on the LSE, rising to highs of UK£7.82 and falling to the lows of UK£6.45. 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 Inchcape's current trading price of UK£7.04 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 Inchcape’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What's The Opportunity In Inchcape?
The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. 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 Inchcape’s ratio of 10.21x is trading slightly below its industry peers’ ratio of 11.35x, which means if you buy Inchcape today, you’d be paying a decent price for it. And if you believe Inchcape 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 Inchcape’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.
See our latest analysis for Inchcape
What does the future of Inchcape look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Inchcape's earnings over the next few years are expected to increase by 25%, 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? INCH’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 track record of its management team. Have these factors changed since the last time you looked at INCH? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?