La-Z-Boy Incorporated (NYSE:LZB), is not the largest company out there, but it led the NYSE gainers with a relatively large price hike in the past couple of weeks. 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 La-Z-Boy’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
See our latest analysis for La-Z-Boy
What is La-Z-Boy worth?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 5.80% above my intrinsic value, which means if you buy La-Z-Boy today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth $32.35, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because La-Z-Boy’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will La-Z-Boy generate?
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. With profit expected to grow by 94% over the next couple of years, the future seems bright for La-Z-Boy. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? LZB’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping tabs on LZB, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
So if you’d like to dive deeper into this stock, it’s crucial to consider any risks it’s facing. You’d be interested to know, that we found 1 warning sign for La-Z-Boy and you’ll want to know about it.
If you are no longer interested in La-Z-Boy, 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. 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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