Is Now An Opportune Moment To Examine Universal Logistics Holdings, Inc. (NASDAQ:ULH)?

Universal Logistics Holdings, Inc. (NASDAQ:ULH), is not the largest company out there, but it saw a significant share price rise of over 20% in the past couple of months on the NASDAQGS. 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? Today I will analyse the most recent data on Universal Logistics Holdings’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Universal Logistics Holdings

What's The Opportunity In Universal Logistics Holdings?

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. 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 6.98x is currently trading slightly below its industry peers’ ratio of 9.68x, which means if you buy Universal Logistics Holdings today, you’d be paying a decent price for it. And if you believe Universal Logistics Holdings should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. So, is there another chance to buy low in the future? Given that Universal Logistics Holdings’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Universal Logistics Holdings generate?

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. With profit expected to grow by a double-digit 15% over the next couple of years, the outlook is positive for Universal Logistics Holdings. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? It seems like the market has already priced in ULH’s positive outlook, 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 ULH? 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 ULH, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for ULH, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you'd like to know more about Universal Logistics Holdings as a business, it's important to be aware of any risks it's facing. You'd be interested to know, that we found 1 warning sign for Universal Logistics Holdings and you'll want to know about this.

If you are no longer interested in Universal Logistics Holdings, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.