Is Now An Opportune Moment To Examine Freightways Limited (NZSE:FRE)?

Freightways Limited (NZSE:FRE), is not the largest company out there, but it received a lot of attention from a substantial price increase on the NZSE 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? Today I will analyse the most recent data on Freightways’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Freightways

What is Freightways worth?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 31.04x is currently trading in-line with its industry peers’ ratio, which means if you buy Freightways today, you’d be paying a relatively sensible price for it. In addition to this, it seems like Freightways’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.

What does the future of Freightways look like?

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 81% over the next couple of years, the future seems bright for Freightways. 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 FRE’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 track record of its management team. Have these factors changed since the last time you looked at FRE? 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 tabs on FRE, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for FRE, 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 Freightways as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 2 warning signs for Freightways you should know about.

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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. 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.
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