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While Loungers plc (LON:LGRS) might not have the largest market cap around , it received a lot of attention from a substantial price increase on the AIM over the last few months. The company is inching closer to its yearly highs following the recent share price climb. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s take a look at Loungers’s outlook and value based on the most recent financial data to see if the opportunity still exists.
View our latest analysis for Loungers
What's The Opportunity In Loungers?
According to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 31.29x is currently well-above the industry average of 22.61x, meaning that it is trading at a more expensive price relative to its peers. But, is there another opportunity to buy low in the future? Since Loungers’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. 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 Loungers generate?
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. Loungers' earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? LGRS’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe LGRS should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on LGRS for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for LGRS, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.