When Should You Buy City Chic Collective Limited (ASX:CCX)?

City Chic Collective Limited (ASX:CCX), is not the largest company out there, but it saw significant share price movement during recent months on the ASX, rising to highs of AU$5.05 and falling to the lows of AU$2.16. 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 City Chic Collective's current trading price of AU$2.16 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 City Chic Collective’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for City Chic Collective

What's the opportunity in City Chic Collective?

According to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. 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 24.87x is currently well-above the industry average of 9.82x, 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 City Chic Collective’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 City Chic Collective 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. 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. City Chic Collective's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has well and truly priced in CCX’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe CCX 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 CCX 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 optimistic prospect is encouraging for CCX, 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 City Chic Collective as a business, it's important to be aware of any risks it's facing. To that end, you should learn about the 2 warning signs we've spotted with City Chic Collective (including 1 which shouldn't be ignored).

If you are no longer interested in City Chic Collective, 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.