Is Now The Time To Look At Buying SP Plus Corporation (NASDAQ:SP)?

SP Plus Corporation (NASDAQ:SP), might not be a large cap stock, but it saw a decent share price growth in the teens level on the NASDAQGS 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. However, could the stock still be trading at a relatively cheap price? Let’s examine SP Plus’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for SP Plus

What's The Opportunity In SP Plus?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that SP Plus’s ratio of 16.14x is trading slightly below its industry peers’ ratio of 19.36x, which means if you buy SP Plus today, you’d be paying a reasonable price for it. And if you believe that SP Plus should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. So, is there another chance to buy low in the future? Given that SP Plus’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will SP Plus 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. With profit expected to grow by 29% over the next year, the near-term future seems bright for SP Plus. 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? SP’s optimistic future growth appears to have been factored into the current share price, 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 SP? 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 SP, 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 SP, 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 want to dive deeper into SP Plus, you'd also look into what risks it is currently facing. While conducting our analysis, we found that SP Plus has 2 warning signs and it would be unwise to ignore them.

If you are no longer interested in SP Plus, 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.