At UK£0.72, Is Coats Group plc (LON:COA) Worth Looking At Closely?

By
Simply Wall St
Published
January 05, 2022
LSE:COA
Source: Shutterstock

Coats Group plc (LON:COA), is not the largest company out there, but it saw a decent share price growth in the teens level on the LSE over the last few months. 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. But what if there is still an opportunity to buy? Let’s examine Coats Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Coats Group

Is Coats Group still cheap?

Great news for investors – Coats Group is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Coats Group’s ratio of 16.84x is below its peer average of 33.81x, which indicates the stock is trading at a lower price compared to the Luxury industry. However, given that Coats Group’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 Coats Group look like?

earnings-and-revenue-growth
LSE:COA Earnings and Revenue Growth January 5th 2022

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Coats Group's earnings over the next few years are expected to increase by 35%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? Since COA is currently below the industry PE ratio, it may be a great time to accumulate more of 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 financial health to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on COA for a while, now might be the time to enter the stock. Its buoyant future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy COA. 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.

Diving deeper into the forecasts for Coats Group mentioned earlier will help you understand how analysts view the stock going forward. So feel free to check out our free graph representing analyst forecasts.

If you are no longer interested in Coats Group, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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