The Buckle, Inc. (NYSE:BKE), is not the largest company out there, but it received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$39.33 at one point, and dropping to the lows of US$32.00. 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 Buckle's current trading price of US$33.91 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 Buckle’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What is Buckle worth?
According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 6.59x is currently trading slightly below its industry peers’ ratio of 7.6x, which means if you buy Buckle today, you’d be paying a reasonable price for it. And if you believe that Buckle 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. Furthermore, it seems like Buckle’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.
What does the future of Buckle 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. 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 3.1% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Buckle, at least in the short term.
What this means for you:
Are you a shareholder? BKE’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 track record of its management team. Have these factors changed since the last time you looked at BKE? 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 an eye on BKE, 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 want to dive deeper into Buckle, you'd also look into what risks it is currently facing. Our analysis shows 2 warning signs for Buckle (1 is concerning!) and we strongly recommend you look at these before investing.
If you are no longer interested in Buckle, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
What are the risks and opportunities for Buckle?
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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.