What Is Cavco Industries, Inc.'s (NASDAQ:CVCO) Share Price Doing?

Cavco Industries, Inc. (NASDAQ:CVCO), might not be a large cap stock, but it saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$294 and falling to the lows of US$218. 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 Cavco Industries' current trading price of US$226 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 Cavco Industries’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Cavco Industries

What is Cavco Industries worth?

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 Cavco Industries’s ratio of 12.21x is trading slightly above its industry peers’ ratio of 8.1x, which means if you buy Cavco Industries today, you’d be paying a relatively reasonable price for it. And if you believe that Cavco Industries should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Furthermore, Cavco Industries’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

Can we expect growth from Cavco Industries?

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. Cavco Industries' earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? CVCO’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 CVCO? 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 an eye on CVCO, 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 CVCO, 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.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Cavco Industries.

If you are no longer interested in Cavco Industries, 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.