Is Lizhi Inc. (NASDAQ:LIZI) Potentially Undervalued?

Lizhi Inc. (NASDAQ:LIZI), might not be a large cap stock, but it saw a significant share price rise of over 20% in the past couple of months on the NASDAQCM. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine Lizhi’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Lizhi

Is Lizhi Still Cheap?

Great news for investors – Lizhi 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 3.3x is currently well-below the industry average of 19.8x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, Lizhi’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.

Can we expect growth from Lizhi?

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. Lizhi's revenue growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. Unless expenses grow at the same level, or higher, this top-line growth should lead to robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? Since LIZI is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on LIZI for a while, now might be the time to make a leap. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy LIZI. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed assessment.

If you want to dive deeper into Lizhi, you'd also look into what risks it is currently facing. While conducting our analysis, we found that Lizhi has 3 warning signs and it would be unwise to ignore these.

If you are no longer interested in Lizhi, 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.