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Northgate plc (LON:NTG), which is in the transportation business, and is based in United Kingdom, 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 take a look at Northgate’s outlook and value based on the most recent financial data to see if the opportunity still exists.
What is Northgate worth?
The stock seems fairly valued at the moment according to my relative valuation model. 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 Northgate’s ratio of 8.6x is trading slightly below its industry peers’ ratio of 9.6x, which means if you buy Northgate today, you’d be paying a reasonable price for it. And if you believe that Northgate should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. Furthermore, it seems like Northgate’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.
Can we expect growth from Northgate?
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. With profit expected to grow by 32% over the next couple of years, the future seems bright for Northgate. 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? It seems like the market has already priced in NTG’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 track record of its management team. Have these factors changed since the last time you looked at NTG? Will you have enough conviction to buy should the price fluctuate below the true value?
Are you a potential investor? If you’ve been keeping tabs on NTG, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for NTG, 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.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Northgate. You can find everything you need to know about Northgate in the latest infographic research report. If you are no longer interested in Northgate, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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.
If you spot an error that warrants correction, please contact the editor at email@example.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. Thank you for reading.