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While Leon's Furniture Limited (TSE:LNF) might not have the largest market cap around , it saw significant share price movement during recent months on the TSX, rising to highs of CA$26.39 and falling to the lows of CA$23.16. 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 Leon's Furniture's current trading price of CA$23.71 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 Leon's Furniture’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is Leon's Furniture Still Cheap?
Good news, investors! Leon's Furniture 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. 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 10.52x is currently well-below the industry average of 17.23x, meaning that it is trading at a cheaper price relative to its peers. Leon's Furniture’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
View our latest analysis for Leon's Furniture
What does the future of Leon's Furniture look like?
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. However, with a negative profit growth of -4.1% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Leon's Furniture. This certainty tips the risk-return scale towards higher risk.
What This Means For You
Are you a shareholder? Although LNF is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to LNF, or whether diversifying into another stock may be a better move for your total risk and return.