Is Now The Time To Look At Buying Linamar Corporation (TSE:LNR)?

While Linamar Corporation (TSE:LNR) might not be the most widely known stock at the moment, it saw a double-digit share price rise of over 10% in the past couple of months on the TSX. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s examine Linamar’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Linamar

What's The Opportunity In Linamar?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 11.37% above my intrinsic value, which means if you buy Linamar today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth CA$59.60, then there isn’t really any room for the share price grow beyond what it’s currently trading. Although, there may be an opportunity to buy in the future. This is because Linamar’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.

Can we expect growth from Linamar?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Linamar's revenue growth are expected to be in the teens in the upcoming year, 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? LNR’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 track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on LNR, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. To help with this, we've discovered 2 warning signs (1 can't be ignored!) that you ought to be aware of before buying any shares in Linamar.

If you are no longer interested in Linamar, 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.