The Goodyear Tire & Rubber Company (NASDAQ:GT), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the NASDAQGS over the last few months. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Today I will analyse the most recent data on Goodyear Tire & Rubber’s outlook and valuation to see if the opportunity still exists.
See our latest analysis for Goodyear Tire & Rubber
What’s The Opportunity In Goodyear Tire & Rubber?
According to my valuation model, Goodyear Tire & Rubber seems to be fairly priced at around 19.65% above my intrinsic value, which means if you buy Goodyear Tire & Rubber today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth $11.34, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because Goodyear Tire & Rubber’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.
Can we expect growth from Goodyear Tire & Rubber?
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. With profit expected to more than double over the next couple of years, the future seems bright for Goodyear Tire & Rubber. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? GT’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping tabs on GT, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
If you want to dive deeper into Goodyear Tire & Rubber, you’d also look into what risks it is currently facing. Be aware that Goodyear Tire & Rubber is showing 3 warning signs in our investment analysis and 1 of those shouldn’t be ignored…
If you are no longer interested in Goodyear Tire & Rubber, 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.
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