Is Clarkson PLC (LON:CKN) Potentially Undervalued?

Clarkson PLC (LON:CKN), is not the largest company out there, but it maintained its current share price over the past couple of month on the LSE, with a relatively tight range of UK£33.75 to UK£37.00. However, does this price actually reflect the true value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Clarkson’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

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Is Clarkson Still Cheap?

According to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. 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 Clarkson’s ratio of 14.8x is above its peer average of 8.52x, which suggests the stock is trading at a higher price compared to the Shipping industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since Clarkson’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

View our latest analysis for Clarkson

Can we expect growth from Clarkson?

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. Though in the case of Clarkson, it is expected to deliver a relatively unexciting earnings growth of 1.7%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.

What This Means For You

Are you a shareholder? It seems like the market has well and truly priced in CKN’s outlook, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe CKN should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio 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 an eye on CKN for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about Clarkson as a business, it's important to be aware of any risks it's facing. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Clarkson.

If you are no longer interested in Clarkson, 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.