Should You Investigate Freightways Limited (NZSE:FRE) At NZ$8.13?
While Freightways Limited (NZSE: FRE) may not be the best-known stock right now, the NZSE's share price has surged well over 20% in recent months. Since many analysts cover the stock, we can assume that price-sensitive announcements have already been included in the share price of the stock. But what if the stock is still a bargain? Let's take a look at the prospect and value of Freightways based on the latest financial data to see if the opportunity still exists.
Check out our latest analysis for Freightways
What is Freightways worth?
According to my price-multiple model, which compares the company's price-earnings ratio to the industry average, the stock price seems justified. In this case, I used price-to-earnings (PE) because there isn't enough information to reliably predict the stock's cash flows. I notice that the Freightways quota of 27.13x is slightly higher than the quota of the industry colleagues of 26.7x. So when you buy Freightways today, you are paying a relatively reasonable price for it. And if you think Freightways should be trading in this space, there is no room for the stock price to grow above that of other industry peers in the long run. Additionally, Freightways' share price appears to be quite stable, which means that there may be fewer opportunities to buy cheaply in the future as the price is similar to that of industry peers. This is because the stock is less volatile than the broader market because of its low beta.
Can we expect growth from Freightways?
Profit and sales growth
The future outlook is an important consideration when looking to buy a stock, especially if, as an investor, you are looking for growth in your portfolio. Buying a great company with solid prospects at a great price is always a good investment. So let's also look at the company's future expectations. With expected earnings growth of 68% over the next few years, the future looks bright for Freightways. It looks like higher cash flow is on the way for the stock, which should result in a higher stock valuation.
What this means for you:
Are you a shareholder? FRE's optimistic future growth appears to have been factored into its current share price, with the shares trading at multiples of the industry price. However, there are other important factors that we didn't consider today, such as the company's financial strength. Have these factors changed since you last looked at FRE? Do you have enough confidence to invest in the company should the price drop below the industry PE ratio?
Are you a potential investor? If you've been keeping your eye on FRE this may not be the best time to buy as it is an industry price multiplier. However, the optimistic forecast for FRE is encouraging. It is therefore worth investigating further factors such as the strength of the balance sheet in order to take advantage of the next price drop.
With this in mind, it is important to be aware of the risks involved if you want to conduct more analysis on the company. You would be interested to know that we found 2 warning signs for Freightways and you will want to know about them.
When you're no longer interested in Freightways, you can use our free platform to view our list of over 50 other stocks with high growth potential.
This article from Simply Wall St is of a general nature. It is not a recommendation to buy or sell stocks and does not take into account your goals or your financial situation. We want to provide you with a long-term, focused analysis based on fundamental data. Note that our analysis may not take into account the latest price sensitive company announcements or quality materials. Simply Wall St has no position in the stocks mentioned.
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