Why Acushnet Holdings Corp. (NYSE:GOLF) Could Be Worth Watching

While Acushnet Holdings Corp. (NYSE:GOLF) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase on the NYSE over the last few months. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s examine Acushnet Holdings’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Acushnet Holdings

What Is Acushnet Holdings Worth?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 Acushnet Holdings’s ratio of 18.16x is trading slightly above its industry peers’ ratio of 13.66x, which means if you buy Acushnet Holdings today, you’d be paying a relatively reasonable price for it. And if you believe Acushnet Holdings should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. Furthermore, Acushnet Holdings’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 Acushnet Holdings?

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. However, with a negative profit growth of -1.6% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Acushnet Holdings. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Currently, GOLF appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on GOLF, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on GOLF for a while, now may not be the most advantageous time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystallize your views on GOLF should the price fluctuate below the industry PE ratio.

If you want to dive deeper into Acushnet Holdings, you'd also look into what risks it is currently facing. Case in point: We've spotted 4 warning signs for Acushnet Holdings you should be mindful of and 3 of them are potentially serious.

If you are no longer interested in Acushnet Holdings, 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.