Have Investors Already Priced In Linamar Corporation's (TSE:LNR) Growth?

By
Simply Wall St
Published
February 27, 2018
TSX:LNR

Linamar Corporation (TSX:LNR), a auto components company based in Canada, received a lot of attention from a substantial price movement on the TSX in the over the last few months, increasing to CA$76.1 at one point, and dropping to the lows of CA$65.02. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Linamar's current trading price of CA$71.12 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 Linamar’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. View our latest analysis for Linamar

What is Linamar worth?

Great news for investors – Linamar is still trading at a fairly cheap price. My valuation model shows that the intrinsic value for the stock is CA$90.88, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. What’s more interesting is that, Linamar’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. 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.

What kind of growth will Linamar generate?

TSX:LNR Future Profit Feb 27th 18
TSX:LNR Future Profit Feb 27th 18
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 43.68% over the next couple of years, the future seems bright for Linamar. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? Since LNR is currently undervalued, it may be a great time to increase your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on LNR for a while, now might be the time to enter the stock. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy LNR. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Linamar. You can find everything you need to know about Linamar in the latest infographic research report. If you are no longer interested in Linamar, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

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Simply Wall St has no position in any of the companies mentioned. This article 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.
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