Liquidity Services Inc (NASDAQ:LQDT), a internet software and services company based in United States, saw significant share price volatility over the past couple of months on the NasdaqGS, rising to the highs of $6.2 and falling to the lows of $5.55. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether LQDT’s current trading price of $5.6 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 LQDT’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 Liquidity Services
What is LQDT worth?
Good news, investors! LQDT is still a bargain right now. In this instance, I’ve used price-to-book ratio (PB) ratio given that there is not enough information to reliably forecast the stock’s cash flows, and its earnings doesn’t seem to reflect its true value. I find that LQDT’s ratio of 1.2x is below its peer average of 4.6x, which suggests the stock is undervalued compared to the internet software and services industry. Another thing to keep in mind is that LQDT’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.
What does the future of LQDT 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. 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. In the upcoming year, LQDT’s earnings are expected to increase by 65.75%, 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? Since LQDT is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.