Should You Think About Buying America's Car-Mart, Inc. (NASDAQ:CRMT) Now?

America's Car-Mart, Inc. (NASDAQ:CRMT), which is in the specialty retail business, and is based in United States, received a lot of attention from a substantial price increase on the NASDAQGS 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? Let’s examine America's Car-Mart’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for America's Car-Mart

What's the opportunity in America's Car-Mart?

The stock seems fairly valued at the moment according to my relative valuation model. 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 13.27x is currently trading slightly below its industry peers’ ratio of 16.65x, which means if you buy America's Car-Mart today, you’d be paying a fair price for it. And if you believe America's Car-Mart should be trading in this range, then there isn’t much room for the share price grow beyond where it’s currently trading. In addition to this, it seems like America's Car-Mart’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.

What does the future of America's Car-Mart look like?

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. Though in the case of America's Car-Mart, it is expected to deliver a relatively unexciting earnings growth of 2.9%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for America's Car-Mart, at least in the near term.

What this means for you:

Are you a shareholder? CRMT’s future growth appears to have been factored into the current share price, with shares trading around its fair value. 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 CRMT? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping tabs on CRMT, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on America's Car-Mart. You can find everything you need to know about America's Car-Mart in the latest infographic research report. If you are no longer interested in America's Car-Mart, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

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