Is There Now An Opportunity In Lifestyle Communities Limited (ASX:LIC)?

Lifestyle Communities Limited (ASX:LIC), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the ASX over the last few months, increasing to AU$9.97 at one point, and dropping to the lows of AU$7.11. 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 Lifestyle Communities' current trading price of AU$7.11 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Lifestyle Communities’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

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What's The Opportunity In Lifestyle Communities?

Lifestyle Communities appears to be expensive according to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Lifestyle Communities’s ratio of 16.61x is above its peer average of 12.49x, which suggests the stock is trading at a higher price compared to the Real Estate industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since Lifestyle Communities’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

View our latest analysis for Lifestyle Communities

What does the future of Lifestyle Communities 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. With profit expected to grow by 62% over the next couple of years, the future seems bright for Lifestyle Communities. 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? LIC’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe LIC 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 an eye on LIC for a while, 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 optimistic prospect is encouraging for LIC, which means 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 Lifestyle Communities as a business, it's important to be aware of any risks it's facing. For example, Lifestyle Communities has 3 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.

If you are no longer interested in Lifestyle Communities, 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.