Should You Investigate Legacy Housing Corporation (NASDAQ:LEGH) At US$15.20?

While Legacy Housing Corporation (NASDAQ:LEGH) might not be the most widely known stock at the moment, it saw a double-digit share price rise of over 10% in the past couple of months on the NASDAQGS. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s examine Legacy Housing’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Legacy Housing

What's the opportunity in Legacy Housing?

Great news for investors – Legacy Housing is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. 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 10.73x is currently well-below the industry average of 16.18x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, Legacy Housing’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What does the future of Legacy Housing look like?

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. Though in the case of Legacy Housing, it is expected to deliver a relatively unexciting earnings growth of 4.8%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for Legacy Housing, at least in the near term.

What this means for you:

Are you a shareholder? Even though growth is relatively muted, since LEGH is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. However, there are also other factors such as financial health to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on LEGH for a while, now might be the time to enter the stock. Its future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy LEGH. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.

Diving deeper into the forecasts for Legacy Housing mentioned earlier will help you understand how analysts view the stock going forward. So feel free to check out our free graph representing analyst forecasts.

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This article by Simply Wall St is general in nature. 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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