Is Now An Opportune Moment To Examine The Goodyear Tire & Rubber Company (NASDAQ:GT)?

The Goodyear Tire & Rubber Company (NASDAQ:GT), is not the largest company out there, but it led the NASDAQGS gainers with a relatively large price hike in the past couple of weeks. 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 take a look at Goodyear Tire & Rubber’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Goodyear Tire & Rubber

Is Goodyear Tire & Rubber Still Cheap?

Great news for investors – Goodyear Tire & Rubber is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio 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 4.28x is currently well-below the industry average of 20.51x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, Goodyear Tire & Rubber’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What kind of growth will Goodyear Tire & Rubber 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. However, with a negative profit growth of -16% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Goodyear Tire & Rubber. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Although GT is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to GT, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping tabs on GT for some time, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. In terms of investment risks, we've identified 1 warning sign with Goodyear Tire & Rubber, and understanding this should be part of your investment process.

If you are no longer interested in Goodyear Tire & Rubber, 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.