What Does Leon's Furniture Limited's (TSE:LNF) Share Price Indicate?

While Leon's Furniture Limited (TSE:LNF) might not have the largest market cap around , it led the TSX gainers with a relatively large price hike in the past couple of weeks. While good news for shareholders, the company has traded much higher in the past year. As a 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 Leon's Furniture’s outlook and value based on the most recent financial data to see if the opportunity still exists.

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What Is Leon's Furniture Worth?

Great news for investors – Leon's Furniture is still trading at a fairly cheap price according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. we find that Leon's Furniture’s ratio of 11.5x is below its peer average of 20.18x, which indicates the stock is trading at a lower price compared to the Specialty Retail industry. However, given that Leon's Furniture’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.

See our latest analysis for Leon's Furniture

Can we expect growth from Leon's Furniture?

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. However, with a negative profit growth of -4.6% expected next year, near-term growth certainly doesn’t appear to be a driver for a buy decision for Leon's Furniture. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Although LNF is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to LNF, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping an eye on LNF for a while, but hesitant on making the leap, we recommend you research further into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

If you want to dive deeper into Leon's Furniture, you'd also look into what risks it is currently facing. For example, Leon's Furniture has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about.

If you are no longer interested in Leon's Furniture, 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.