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While Premier Foods plc (LON:PFD) might not have the largest market cap around , it saw a decent share price growth of 19% on the LSE over the last few months. The company's trading levels have approached the yearly peak, following the recent bounce in the share price. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Today we will analyse the most recent data on Premier Foods’s outlook and valuation to see if the opportunity still exists.
View our latest analysis for Premier Foods
What's The Opportunity In Premier Foods?
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 Premier Foods’s ratio of 13.28x is trading slightly below its industry peers’ ratio of 13.82x, which means if you buy Premier Foods today, you’d be paying a reasonable price for it. And if you believe Premier Foods 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. So, is there another chance to buy low in the future? Given that Premier Foods’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from Premier Foods?
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. Premier Foods' earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? PFD’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 PFD? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?