Is Now An Opportune Moment To Examine Champion Homes, Inc. (NYSE:SKY)?

Simply Wall St · 10/15 18:36

Champion Homes, Inc. (NYSE:SKY), is not the largest company out there, but it saw a significant share price rise of 41% in the past couple of months on the NYSE. The recent jump in the share price has meant that the company is trading at close to its 52-week high. 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? Let’s examine Champion Homes’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Champion Homes

What's The Opportunity In Champion Homes?

Champion Homes is currently expensive based on our price multiple model, where we look at the company's price-to-earnings ratio in comparison to 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 Champion Homes’s ratio of 38.87x is above its peer average of 11.89x, which suggests the stock is trading at a higher price compared to the Consumer Durables industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since Champion Homes’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What does the future of Champion Homes look like?

earnings-and-revenue-growth
NYSE:SKY Earnings and Revenue Growth October 15th 2024

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, Champion Homes' earnings are expected to increase by 32%, 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? SKY’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe SKY 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.

Are you a potential investor? If you’ve been keeping an eye on SKY for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for SKY, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about Champion Homes as a business, it's important to be aware of any risks it's facing. For example, we've discovered 2 warning signs that you should run your eye over to get a better picture of Champion Homes.

If you are no longer interested in Champion Homes, you can use our free platform to see our list of over 50 other stocks with a high growth potential.