Yahoo Finance Is Now An Opportune Moment To Examine United Carpets Group plc (LON:UCG)?
United Carpets Group plc (LON:UCG), which is in the specialty retail business, and is based in United Kingdom, saw a decent share price growth in the teens level on the AIM over the last few months. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s examine United Carpets Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Check out our latest analysis for United Carpets Group
What is United Carpets Group worth?
The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that United Carpets Group’s ratio of 4.68x is trading slightly below its industry peers’ ratio of 8.69x, which means if you buy United Carpets Group today, you’d be paying a decent price for it. And if you believe United Carpets Group should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. Furthermore, it seems like United Carpets Group’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.
Can we expect growth from United Carpets Group?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. Though in the case of United Carpets Group, it is expected to deliver a highly negative earnings growth in the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What this means for you:
Are you a shareholder? Currently, UCG appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on UCG, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on UCG for a while, now may not be the most advantageous time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystallize your views on UCG should the price fluctuate below the industry PE ratio.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on United Carpets Group. You can find everything you need to know about United Carpets Group in the latest infographic research report. If you are no longer interested in United Carpets Group, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.