Stock Analysis

Why Coats Group plc (LON:COA) Could Be Worth Watching

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LSE:COA
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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. However, what if the stock is still a bargain? Let’s examine Coats Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Coats Group

Is Coats Group Still Cheap?

According to my valuation model, Coats Group seems to be fairly priced at around 16% below my intrinsic value, which means if you buy Coats Group today, you’d be paying a fair price for it. And if you believe that the stock is really worth £0.90, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? 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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Coats Group generate?

earnings-and-revenue-growth
LSE:COA Earnings and Revenue Growth December 8th 2023

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. 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 double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? It seems like the market has already priced in COA’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping tabs on COA, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook 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.

If you'd like to know more about Coats Group as a business, it's important to be aware of any risks it's facing. In terms of investment risks, we've identified 5 warning signs with Coats Group, and understanding these should be part of your investment process.

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.

Valuation is complex, but we're helping make it simple.

Find out whether Coats Group is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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