Blue Bird Corporation (NASDAQ:BLBD), is not the largest company out there, but it led the NASDAQGM gainers with a relatively large price hike in the past couple of weeks. While good news for shareholders, the company has traded much higher in the past year. 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? Let's examine Blue Bird's valuation and outlook in more detail to determine if there's still a bargain opportunity.
What Is Blue Bird Worth?
The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. We'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 17.67x is currently trading slightly below its industry peers' ratio of 22.06x, which means if you buy Blue Bird today, you'd be paying a decent price for it. And if you believe that Blue Bird should be trading at this level in the long run, then there's not much of an upside to gain over and above other industry peers. So, is there another chance to buy low in the future? Given that Blue Bird'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 does the future of Blue Bird look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Blue Bird's earnings over the next few years are expected to increase by 61%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? It seems like the market has already priced in BLBD'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 track record of its management team. Have these factors changed since the last time you looked at BLBD? Will 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 tabs on BLBD, 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 BLBD, 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.
With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Case in point: We've spotted 2 warning signs for Blue Bird you should be aware of.
If you are no longer interested in Blue Bird, 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.