At US$7.75, Is Five Point Holdings, LLC (NYSE:FPH) Worth Looking At Closely?

Five Point Holdings, LLC (NYSE:FPH), is not the largest company out there, but it saw a decent share price growth in the teens level on the NYSE over the last few months. Less-covered, small caps sees 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? Today I will analyse the most recent data on Five Point Holdings’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Five Point Holdings

What's the opportunity in Five Point Holdings?

Five Point Holdings is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison 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 36.4x is currently well-above the industry average of 22.48x, meaning that it is trading at a more expensive price relative to its peers. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since Five Point Holdings’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. 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 kind of returns can we expect from Five Point Holdings in the future?

Valuation is only one aspect of forming your investment views on Five Point Holdings. Another thing to consider is whether it is actually a high-quality company. The best type of investment is always in a great company, producing robust returns at a cheap price. We can determine the quality of a stock many ways; one way is to look at how much return it generates relative to the money we’ve invested in the stock. Five Point Holdings is expected to return 12% of your investment in the upcoming year if you buy the stock today. This is a relatively good return on your investment which builds up the case for owning the stock.

What this means for you:

Are you a shareholder? It seems like the market has well and truly priced in FPH’s high returns, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe FPH should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on FPH for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for FPH, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

It can be quite valuable to consider what analysts expect for Five Point Holdings from their most recent forecasts. 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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