While Lifestyle Communities Limited (ASX:LIC) might not have the largest market cap around , it saw a decent share price growth of 19% on the ASX over the last few months. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. 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 we will analyse the most recent data on Lifestyle Communities’s outlook and valuation to see if the opportunity still exists.
Check out our latest analysis for Lifestyle Communities
According to our price multiple model, where we compare the company’s price-to-earnings ratio to the industry average, the stock currently looks expensive. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Lifestyle Communities’s ratio of 21.15x is above its peer average of 13.03x, which suggests the stock is trading at a higher price compared to the Real Estate industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Lifestyle Communities’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.
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. Lifestyle Communities’ earnings over the next few years are expected to increase by 94%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
Are you a shareholder? It seems like the market has well and truly priced in LIC’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe LIC should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio 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 LIC for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for LIC, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
With this in mind, we wouldn’t consider investing in a stock unless we had a thorough understanding of the risks. At Simply Wall St, we found 3 warning signs for Lifestyle Communities and we think they deserve your attention.
If you are no longer interested in Lifestyle Communities, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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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.