Should You Investigate Freightways Limited (NZSE:FRE) At NZ$11.80?

Freightways Limited (NZSE:FRE), might not be a large cap stock, but it saw significant share price movement during recent months on the NZSE, rising to highs of NZ$13.00 and falling to the lows of NZ$11.80. 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 Freightways' current trading price of NZ$11.80 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Freightways’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 Freightways

Is Freightways still cheap?

Freightways appears to be overvalued by 25% at the moment, based on my discounted cash flow valuation. The stock is currently priced at NZ$11.80 on the market compared to my intrinsic value of NZ$9.40. Not the best news for investors looking to buy! In addition to this, it seems like Freightways’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will Freightways generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Freightways' earnings over the next few years are expected to increase by 39%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has well and truly priced in FRE’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe FRE should trade below its current price, selling high and buying it back up again when its price falls towards its real value 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 FRE for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for FRE, which means 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 Freightways as a business, it's important to be aware of any risks it's facing. For example - Freightways has 2 warning signs we think you should be aware of.

If you are no longer interested in Freightways, 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.