Is It Time To Consider Buying Casey's General Stores, Inc. (NASDAQ:CASY)?

Casey's General Stores, Inc. (NASDAQ:CASY), 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$216 and falling to the lows of US$182. 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 Casey's General Stores' current trading price of US$198 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 Casey's General Stores’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 Casey's General Stores

What's the opportunity in Casey's General Stores?

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. 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 21.72x is currently trading slightly above its industry peers’ ratio of 18.97x, which means if you buy Casey's General Stores today, you’d be paying a relatively reasonable price for it. And if you believe Casey's General Stores 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. In addition to this, it seems like Casey's General Stores’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will Casey's General Stores generate?

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. With profit expected to grow by a double-digit 16% over the next couple of years, the outlook is positive for Casey's General Stores. 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? CASY’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 CASY? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on CASY, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for CASY, 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.

So while earnings quality is important, it's equally important to consider the risks facing Casey's General Stores at this point in time. You'd be interested to know, that we found 1 warning sign for Casey's General Stores and you'll want to know about this.

If you are no longer interested in Casey's General Stores, 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.