XL Fleet Corp. (NYSE:XL), is not the largest company out there, but it received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$2.45 at one point, and dropping to the lows of US$1.40. 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 XL Fleet's current trading price of US$1.50 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at XL Fleet’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Check out our latest analysis for XL Fleet
What's the opportunity in XL Fleet?
Good news, investors! XL Fleet is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. I’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 7.37x is currently well-below the industry average of 17.48x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, XL Fleet’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to move closer to its industry peers, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
Can we expect growth from XL Fleet?
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. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for XL Fleet, at least in the near future.
What this means for you:
Are you a shareholder? Although XL is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. I recommend you think about whether you want to increase your portfolio exposure to XL, or whether diversifying into another stock may be a better move for your total risk and return.