Is It Time To Consider Buying Element Fleet Management Corp. (TSE:EFN)?

Element Fleet Management Corp. (TSE:EFN), might not be a large cap stock, but it saw a decent share price growth of 18% on the TSX over the last few months. The company's trading levels have approached the yearly peak, following the recent bounce in the share price. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s take a look at Element Fleet Management’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for Element Fleet Management

Is Element Fleet Management Still Cheap?

According to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. We’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 23.46x is currently trading slightly below its industry peers’ ratio of 23.46x, which means if you buy Element Fleet Management today, you’d be paying a decent price for it. And if you believe that Element Fleet Management should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Furthermore, it seems like Element Fleet Management’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

What does the future of Element Fleet Management look like?

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. With profit expected to grow by 20% over the next year, the near-term future seems bright for Element Fleet Management. 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? It seems like the market has already priced in EFN’s positive outlook, with shares trading around industry price multiples. 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 EFN? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on EFN, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for EFN, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you'd like to know more about Element Fleet Management as a business, it's important to be aware of any risks it's facing. When we did our research, we found 2 warning signs for Element Fleet Management (1 can't be ignored!) that we believe deserve your full attention.

If you are no longer interested in Element Fleet Management, 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.