Greencore Group plc (LON:GNC), might not be a large cap stock, but it led the LSE gainers with a relatively large price hike in the past couple of weeks. The company's trading levels have reached its high for the past year, following the recent bounce in the share price. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Today we will analyse the most recent data on Greencore Group’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Greencore Group

What Is Greencore Group Worth?

Greencore Group appears to be expensive according to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and 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 Greencore Group’s ratio of 17.98x is above its peer average of 14.31x, which suggests the stock is trading at a higher price compared to the Food industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Greencore Group’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 Greencore Group generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Greencore Group's earnings over the next few years are expected to increase by 23%, 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? GNC’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe GNC 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.