LCI Industries (LCII): Revisiting Valuation After Upbeat Earnings Revisions and a Strong Buy Rating

LCI Industries (LCII) just caught investors attention after another round of upbeat earnings estimate revisions pushed it into Strong Buy territory, a shift largely driven by its habit of topping Wall Street expectations.

See our latest analysis for LCI Industries.

Those upbeat revisions are landing against a backdrop where LCI Industries latest share price of $123.6 sits near recent highs, with a 30 day share price return of 10.32 percent and a 1 year total shareholder return of 25.39 percent. This suggests momentum is building rather than fading.

If LCII’s run has you thinking about what else might be gaining traction, this could be a good moment to scout other auto manufacturers through auto manufacturers.

Yet with the stock near 52 week highs but still trading at a sizeable discount to some intrinsic value estimates, investors now face the key question: is this a fresh buying opportunity, or is the market already pricing in future growth?

Most Popular Narrative: 7.4% Overvalued

With LCI Industries last closing at $123.60 versus a narrative fair value of about $115.11, expectations are leaning ahead of that fair value line.

The analysts have a consensus price target of $104.75 for LCI Industries based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $135.0, and the most bearish reporting a price target of $85.0.

Read the complete narrative.

Curious how modest revenue growth, slowly improving margins, and a lower future earnings multiple still add up to this fair value? The full narrative shows the math.

Result: Fair Value of $115.11 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, soft RV retail demand and a shift toward lower content, entry level models could undercut margin gains and challenge the upbeat growth narrative.

Find out about the key risks to this LCI Industries narrative.

Another View: DCF Points to Upside

While the narrative fair value suggests LCI Industries looks 7.4 percent overvalued, our DCF model tells a different story. It indicates shares trade about 25 percent below an estimated fair value of roughly $164.91. Are investors underestimating the cash flow potential behind this cyclical recovery?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out LCI Industries for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 901 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own LCI Industries Narrative

If this perspective does not fully align with your own, or you would rather dig into the numbers yourself, you can build a custom narrative in just a few minutes, Do it your way.

A great starting point for your LCI Industries research is our analysis highlighting 4 key rewards and 1 important warning sign that could impact your investment decision.

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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.

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