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While Luceco plc (LON:LUCE) might not have the largest market cap around , it received a lot of attention from a substantial price increase on the LSE over the last few months. While good news for shareholders, the company has traded much higher in the past year. 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. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Luceco’s outlook and value based on the most recent financial data to see if the opportunity still exists.
See our latest analysis for Luceco
What Is Luceco Worth?
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 Luceco’s ratio of 13.25x is trading slightly below its industry peers’ ratio of 14.88x, which means if you buy Luceco today, you’d be paying a decent price for it. And if you believe that Luceco should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. So, is there another chance to buy low in the future? Given that Luceco’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 Luceco?
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. With profit expected to grow by a double-digit 15% over the next couple of years, the outlook is positive for Luceco. 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? LUCE’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 LUCE? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?