Is Now The Time To Look At Buying Louisiana-Pacific Corporation (NYSE:LPX)?

Louisiana-Pacific Corporation (NYSE:LPX), might not be a large cap stock, but it saw a significant share price rise of 26% in the past couple of months on the NYSE. The company's trading levels have reached its high for the past year, following the recent bounce in the share price. 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 take a look at Louisiana-Pacific’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Louisiana-Pacific

What Is Louisiana-Pacific Worth?

According to our 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, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Louisiana-Pacific’s ratio of 19.52x is trading slightly below its industry peers’ ratio of 19.52x, which means if you buy Louisiana-Pacific today, you’d be paying a reasonable price for it. And if you believe that Louisiana-Pacific should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Although, there may be an opportunity to buy in the future. This is because Louisiana-Pacific’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What kind of growth will Louisiana-Pacific generate?

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. Louisiana-Pacific's 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? LPX’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 LPX? 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 LPX, 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 LPX, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

It can be quite valuable to consider what analysts expect for Louisiana-Pacific from their most recent forecasts. So feel free to check out our free graph representing analyst forecasts.

If you are no longer interested in Louisiana-Pacific, 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.