While Lifestyle Communities Limited (ASX:LIC) might not have the largest market cap around , it saw a decent share price growth of 19% on the ASX over the last few months. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. 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? Today we will analyse the most recent data on Lifestyle Communities’s outlook and valuation to see if the opportunity still exists.
Check out our latest analysis for Lifestyle Communities
According to our price multiple model, where we compare the company’s price-to-earnings ratio to the industry average, the stock currently looks expensive. 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 Lifestyle Communities’s ratio of 21.15x is above its peer average of 13.03x, which suggests the stock is trading at a higher price compared to the Real Estate industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Lifestyle Communities’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.
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. Lifestyle Communities’ earnings over the next few years are expected to increase by 94%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
Are you a shareholder? It seems like the market has well and truly priced in LIC’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe LIC should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.