Leggett & Platt, Incorporated (NYSE:LEG), is not the largest company out there, but it saw significant share price movement during recent months on the NYSE, rising to highs of US$41.63 and falling to the lows of US$33.39. 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 Leggett & Platt's current trading price of US$34.08 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Leggett & Platt’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is Leggett & Platt Still Cheap?
Leggett & Platt appears to be expensive according to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and 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 11.64x is currently well-above the industry average of 6.34x, 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? Given that Leggett & Platt’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.
Can we expect growth from Leggett & Platt?
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. 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 a relatively muted profit growth of 8.7% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Leggett & Platt, at least in the short term.
What This Means For You
Are you a shareholder? It seems like the market has well and truly priced in LEG’s outlook, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe LEG 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 tabs on LEG for some time, 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 positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.
If you'd like to know more about Leggett & Platt as a business, it's important to be aware of any risks it's facing. When we did our research, we found 2 warning signs for Leggett & Platt (1 is a bit unpleasant!) that we believe deserve your full attention.
If you are no longer interested in Leggett & Platt, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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