Is There Now An Opportunity In Kirkland's, Inc. (NASDAQ:KIRK)?

Kirkland's, Inc. (NASDAQ:KIRK), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$26.63 at one point, and dropping to the lows of US$14.17. 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$14.79 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.

See 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 6.22x is trading slightly below its industry peers’ ratio of 8.42x, 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?

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. 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. However, with a negative profit growth of -16% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Kirkland's. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? KIRK seems priced close to industry peers right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on KIRK, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on KIRK for a while, now may not be the most optimal time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on KIRK should the price fluctuate below the industry PE ratio.

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. Be aware that Kirkland's is showing 2 warning signs in our investment analysis and 1 of those is significant...

If you are no longer interested in Kirkland's, 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.