At HK$22.65, Is It Time To Put L'Occitane International S.A. (HKG:973) On Your Watch List?

L'Occitane International S.A. (HKG:973), might not be a large cap stock, but it saw significant share price movement during recent months on the SEHK, rising to highs of HK$30.90 and falling to the lows of HK$21.10. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether L'Occitane International's current trading price of HK$22.65 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at L'Occitane International’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for L'Occitane International

What is L'Occitane International worth?

L'Occitane International is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 20.44x is currently well-above the industry average of 12.44x, meaning that it is trading at a more expensive price relative to its peers. Furthermore, L'Occitane International’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach levels around its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

What kind of growth will L'Occitane International generate?

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 54% over the next couple of years, the future seems bright for L'Occitane International. 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 well and truly priced in 973’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe 973 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 tabs on 973 for some time, 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 outlook is encouraging for 973, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into L'Occitane International, you'd also look into what risks it is currently facing. While conducting our analysis, we found that L'Occitane International has 1 warning sign and it would be unwise to ignore this.

If you are no longer interested in L'Occitane International, 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.