In This Article:
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£8.60 and falling to the lows of UK£7.44. 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£7.71 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.
See our latest analysis for Inchcape
What Is Inchcape Worth?
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 11.18x is trading slightly below its industry peers’ ratio of 13.04x, 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.
What kind of growth will Inchcape generate?
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 profit expected to grow by 37% over the next couple of years, the future seems bright for Inchcape. 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? It seems like the market has already priced in INCH’s positive outlook, 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 confidence to invest in the company should the price drop below the industry PE ratio?