While Covenant Logistics Group, Inc. (NASDAQ:CVLG) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$56.91 and falling to the lows of US$38.78. 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 Covenant Logistics Group's current trading price of US$38.78 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let's take a look at Covenant Logistics Group'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 Covenant Logistics Group
What Is Covenant Logistics Group Worth?
Great news for investors – Covenant Logistics Group is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I'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 9.43x is currently well-below the industry average of 15.98x, meaning that it is trading at a cheaper price relative to its peers. Although, there may be another chance to buy again in the future. This is because Covenant Logistics Group's beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company's shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What does the future of Covenant Logistics Group look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Though in the case of Covenant Logistics Group, it is expected to deliver a relatively unexciting top-line growth of 9.8% in the next few years, which doesn't help build up its investment thesis. Growth doesn't appear to be a main reason for a buy decision for the company, at least in the near term.
What This Means For You
Are you a shareholder? Even though growth is relatively muted, since CVLG is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.
Are you a potential investor? If you've been keeping an eye on CVLG for a while, now might be the time to make a leap. Its future outlook isn't fully reflected in the current share price yet, which means it's not too late to buy CVLG. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed assessment.
With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. You'd be interested to know, that we found 3 warning signs for Covenant Logistics Group and you'll want to know about them.
If you are no longer interested in Covenant Logistics Group, 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.
