Columbia Sportswear Company (NASDAQ:COLM), is not the largest company out there, but it received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$104 at one point, and dropping to the lows of US$93.74. 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 Columbia Sportswear's current trading price of US$99.69 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Columbia Sportswear’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What is Columbia Sportswear worth?
According to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. 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 25.78x is currently well-above the industry average of 19.36x, meaning that it is trading at a more expensive price relative to its peers. In addition to this, it seems like Columbia Sportswear’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.
Can we expect growth from Columbia Sportswear?
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. With profit expected to grow by 83% over the next couple of years, the future seems bright for Columbia Sportswear. 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 COLM’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe COLM should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio 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 COLM for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for COLM, 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 Columbia Sportswear as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 1 warning sign for Columbia Sportswear you should know about.
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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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