FlexiGroup Limited (ASX:FXL), a consumer finance company based in Australia, led the ASX gainers with a relatively large price hike in the past couple of weeks. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Today I will analyse the most recent data on FlexiGroup’s outlook and valuation to see if the opportunity still exists. See our latest analysis for FlexiGroup
What’s the opportunity in FlexiGroup?
FlexiGroup appears to be overvalued by 49% at the moment, based on my discounted cash flow valuation. The stock is currently priced at AU$2.22 on the market compared to my intrinsic value of A$1.49. This means that the buying opportunity has probably disappeared for now. But, is there another opportunity to buy low in the future? Given that FlexiGroup’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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of FlexiGroup 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. In FlexiGroup’s case, its revenues over the next few years are expected to grow by 64.88%, indicating a highly optimistic future ahead. If expense does not increase by the same rate, or higher, this top line growth should lead to stronger cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? FXL’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe FXL should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on FXL for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for FXL, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on FlexiGroup. You can find everything you need to know about FlexiGroup in the latest infographic research report. If you are no longer interested in FlexiGroup, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.