TravelCenters of America LLC (NASDAQ:TA), a specialty retail company based in United States, led the NasdaqGS gainers with a relatively large price hike in the past couple of weeks. 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 TravelCenters of America’s valuation and outlook in more detail to determine if there’s still a bargain opportunity. Check out our latest analysis for TravelCenters of America
Is TravelCenters of America still cheap?Good news, investors! TravelCenters of America is still a bargain right now. I’ve used the price-to-equity ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 5.19x is currently well-below the industry average of 20.63x, meaning that it is trading at a cheaper price relative to its peers. Although, there may be another chance to buy again in the future. This is because TravelCenters of America’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
Can we expect growth from TravelCenters of America?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. Though in the case of TravelCenters of America, it is expected to deliver a highly negative earnings growth in the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What this means for you:
Are you a shareholder? Although TA is currently undervalued, the negative outlook does bring on some uncertainty, which equates to higher risk. I recommend you think about whether you want to increase your portfolio exposure to TA, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping an eye on TA for a while, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on TravelCenters of America. You can find everything you need to know about TravelCenters of America in the latest infographic research report. If you are no longer interested in TravelCenters of America, you can use our free platform to see my list of over 50 other stocks with a high growth potential.