While Global Ship Lease, Inc. (NYSE:GSL) might not have the largest market cap around , it received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$27.24 at one point, and dropping to the lows of US$22.94. 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 Global Ship Lease's current trading price of US$23.33 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 Global Ship Lease's outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What's The Opportunity In Global Ship Lease?
Good news, investors! Global Ship Lease is still a bargain right now according to our price multiple model, which compares the company's price-to-earnings ratio to the industry average. 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 Global Ship Lease's ratio of 2.55x is below its peer average of 4.94x, which indicates the stock is trading at a lower price compared to the Shipping industry. However, given that Global Ship Lease'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 kind of growth will Global Ship Lease generate?
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. However, with a negative profit growth of -2.2% expected over the next couple of years, near-term growth certainly doesn't appear to be a driver for a buy decision for Global Ship Lease. This certainty tips the risk-return scale towards higher risk.
What This Means For You
Are you a shareholder? Although GSL is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. We recommend you think about whether you want to increase your portfolio exposure to GSL, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you've been keeping tabs on GSL for some time, but hesitant on making the leap, we recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
If you want to dive deeper into Global Ship Lease, you'd also look into what risks it is currently facing. To that end, you should learn about the 2 warning signs we've spotted with Global Ship Lease (including 1 which is a bit unpleasant).
If you are no longer interested in Global Ship Lease, 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.
