Adairs Limited (ASX:ADH), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the ASX over the last few months. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. 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? Today we will analyse the most recent data on Adairs’s outlook and valuation to see if the opportunity still exists.

Our free stock report includes 1 warning sign investors should be aware of before investing in Adairs. Read for free now.

What Is Adairs Worth?

Great news for investors – Adairs is still trading at a fairly cheap price according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. 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 14.44x is currently well-below the industry average of 20.53x, meaning that it is trading at a cheaper price relative to its peers. However, given that Adairs’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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

Check out our latest analysis for Adairs

Can we expect growth from Adairs?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Adairs' earnings over the next few years are expected to increase by 64%, 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? Since ADH is currently below the industry PE ratio, it may be a great time to increase your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on ADH for a while, now might be the time to enter the stock. Its prosperous future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy ADH. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.