Why Lerøy Seafood Group ASA (OB:LSG) Could Be Worth Watching

While Lerøy Seafood Group ASA (OB:LSG) might not have the largest market cap around , it saw a decent share price growth of 14% on the OB over the last few months. The company is inching closer to its yearly highs following the recent share price climb. As a mid-cap 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 Lerøy Seafood Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Lerøy Seafood Group

Is Lerøy Seafood Group Still Cheap?

The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. 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 Lerøy Seafood Group’s ratio of 18.61x is trading slightly above its industry peers’ ratio of 18.27x, which means if you buy Lerøy Seafood Group today, you’d be paying a relatively sensible price for it. And if you believe that Lerøy Seafood Group should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Furthermore, Lerøy Seafood Group’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

What does the future of Lerøy Seafood Group look like?

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. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 97% over the next couple of years, the future seems bright for Lerøy Seafood Group. 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 LSG’s positive outlook, with shares trading around industry price multiples. 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 LSG? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on LSG, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for LSG, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Every company has risks, and we've spotted 1 warning sign for Lerøy Seafood Group you should know about.

If you are no longer interested in Lerøy Seafood 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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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.