Should You Think About Buying K-Bro Linen Inc. (TSE:KBL) Now?

K-Bro Linen Inc. (TSE:KBL), which is in the commercial services business, and is based in Canada, received a lot of attention from a substantial price movement on the TSX over the last few months, increasing to CA$45.85 at one point, and dropping to the lows of CA$25.00. 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 K-Bro Linen's current trading price of CA$26.72 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 K-Bro Linen’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 K-Bro Linen

What's the opportunity in K-Bro Linen?

The stock is currently trading at CA$26.72 on the share market, which means it is overvalued by 27% compared to my intrinsic value of CA$20.96. This means that the opportunity to buy K-Bro Linen at a good price has disappeared! If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that K-Bro Linen’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 K-Bro Linen 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 more than double over the next couple of years, the future seems bright for K-Bro Linen. 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? KBL’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe KBL should trade below its current price, selling high and buying it back up again when its price falls towards its real value 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 KBL for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for KBL, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

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

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.