Group 1 Automotive, Inc. (NYSE:GPI), 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$276 at one point, and dropping to the lows of US$245. 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 Group 1 Automotive's current trading price of US$248 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let's take a look at Group 1 Automotive's outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Check out our latest analysis for Group 1 Automotive
What Is Group 1 Automotive Worth?
The stock seems fairly valued at the moment according to my valuation model. It's trading around 7.0% below my intrinsic value, which means if you buy Group 1 Automotive today, you'd be paying a reasonable price for it. And if you believe that the stock is really worth $266.43, then there's not much of an upside to gain from mispricing. Is there another opportunity to buy low in the future? Since Group 1 Automotive's share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What kind of growth will Group 1 Automotive generate?
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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let's also take a look at the company's future expectations. Though in the case of Group 1 Automotive, it is expected to deliver a highly negative earnings growth in the next few years, which doesn't help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What This Means For You
Are you a shareholder? Currently, GPI appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.
Are you a potential investor? If you've been keeping an eye on GPI for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there's less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven't considered today, which can help crystalize your views on GPI should the price fluctuate below its true value.
In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Be aware that Group 1 Automotive is showing 3 warning signs in our investment analysis and 2 of those make us uncomfortable...
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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.