At US$19.21, Is It Time To Put Kirkland's, Inc. (NASDAQ:KIRK) On Your Watch List?

Kirkland's, Inc. (NASDAQ:KIRK), 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$33.06 and falling to the lows of US$19.21. 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 Kirkland's' current trading price of US$19.21 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Kirkland's’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 Kirkland's

Is Kirkland's still cheap?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Kirkland's’s ratio of 10.6x is trading slightly below its industry peers’ ratio of 14.11x, which means if you buy Kirkland's today, you’d be paying a decent price for it. And if you believe that Kirkland's 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. Is there another opportunity to buy low in the future? Since Kirkland's’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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 does the future of Kirkland's 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. However, with a relatively muted profit growth of 9.7% expected over the next year, growth doesn’t seem like a key driver for a buy decision for Kirkland's, at least in the short term.

What this means for you:

Are you a shareholder? KIRK’s 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 financial strength of the company. Have these factors changed since the last time you looked at KIRK? 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 KIRK, now may not be the most optimal time to buy, given it is trading around industry price multiples. 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.

If you'd like to know more about Kirkland's as a business, it's important to be aware of any risks it's facing. In terms of investment risks, we've identified 2 warning signs with Kirkland's, and understanding these should be part of your investment process.

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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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