Is Li-Cycle Holdings Corp. (NYSE:LICY) Potentially Undervalued?

While Li-Cycle Holdings Corp. (NYSE:LICY) might not be the most widely known stock at the moment, it saw a decent share price growth in the teens level on the NYSE 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 Li-Cycle Holdings’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Li-Cycle Holdings

What's The Opportunity In Li-Cycle Holdings?

Li-Cycle Holdings appears to be overvalued by 35% at the moment, based on my discounted cash flow valuation. The stock is currently priced at US$5.32 on the market compared to my intrinsic value of $3.94. This means that the opportunity to buy Li-Cycle Holdings at a good price has disappeared! If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Li-Cycle Holdings’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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Li-Cycle Holdings generate?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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 36% over the next couple of years, the future seems bright for Li-Cycle Holdings. 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 well and truly priced in LICY’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 LICY 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 an eye on LICY for a while, 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 LICY, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example - Li-Cycle Holdings has 1 warning sign we think you should be aware of.

If you are no longer interested in Li-Cycle Holdings, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.