Even though LCI Industries (NYSE:LCII) is not a large-cap stock, its share price has moved significantly on the NYSE in recent months, hitting highs of US$136 and lows of US$106. Investors may have a better opportunity to enter the stock market and maybe purchase it at a reduced price during certain share price swings. The question of whether LCI Industries’ present trading price of US$106 is indicative of the mid-cap’s true value has to be answered. Or is it now priced too low, giving us the chance to purchase? Using the most recent financial data, let’s examine LCI Industries’s outlook and valuation to see whether there are any factors that might lead to a price shift.
Based on my price multiple model, which compares LCI Industries’ price-to-earnings ratio to the industry average, I believe the firm is now pricey. In this case, the price-to-earnings (PE) ratio was utilised since it provides a reliable estimate of the stock’s cash flows in the absence of other information. The ratio of 31.55x for LCI Industries, in my opinion, is greater than the peer average of 18.5x, indicating that the company is selling at a premium in relation to the auto components sector.
But will there ever be another chance to purchase cheap? Given how erratic the share price of LCI Industries is, there’s a risk that it may drop (or climb) further in the future, providing us with another opportunity to invest. This is because of its high beta, a reliable measure of how much the stock fluctuates in relation to the market as a whole.
It may be a good idea for investors seeking portfolio growth to think about a company’s future before purchasing its shares. A stronger investment thesis would be significant growth potential at a low price, even though value investors would contend that the inherent value in relation to the price is what matters most. LCI Industries appears to have a promising future in the foreseeable future, with profit predicted to expand by 91% over the next year. It appears that the stock will likely see increased cash flow, which should lead to a better share price.
Since shares of LCII are selling above industry price multiples, it suggests that the company’s bullish outlook for future growth has been included into the share price. But this raises another query: is now the ideal moment to sell? It might be advantageous to sell high and then purchase LCII back up when its price approaches the industry PE ratio if you think it should move below its present level. However, consider if its foundations have altered before making this choice.
It might not be the ideal moment to buy LCII stock if you’ve been watching it for a long. Given that the price has outperformed that of its industry rivals, mispricing is probably no longer an advantage. To take advantage of the next price decrease, it is worthwhile to delve further into other aspects, since the positive outlook for LCII is encouraging.