Is Now An Opportune Moment To Examine Fleetwood Limited (ASX:FWD)?

Fleetwood Limited (ASX:FWD), is not the largest company out there, but it saw a significant share price rise of over 20% in the past couple of months on the ASX. 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 Fleetwood’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Fleetwood

Is Fleetwood still cheap?

Fleetwood appears to be overvalued by 24% at the moment, based on my discounted cash flow valuation. The stock is currently priced at AU$2.63 on the market compared to my intrinsic value of A$2.12. Not the best news for investors looking to buy! If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Fleetwood’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.

What does the future of Fleetwood look like?

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. Fleetwood's revenue growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. Unless expenses grow at the same level, or higher, this top-line growth should lead to robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? FWD’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe FWD should trade below its current price, selling high and buying it back up again when its price falls towards its real value 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 FWD for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for FWD, which means it’s worth diving deeper into other factors 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. For example - Fleetwood has 1 warning sign we think you should be aware of.

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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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