Mohawk Industries, Inc. (NYSE:MHK), might not be a large cap stock, but it saw a decent share price growth in the teens level on the NYSE 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, could the stock still be trading at a relatively cheap price? Let’s take a look at Mohawk Industries’s outlook and value based on the most recent financial data to see if the opportunity still exists.
View our latest analysis for Mohawk Industries
What is Mohawk Industries worth?
According to my price multiple model, which makes a comparison between the company’s price-to-earnings ratio and the industry average, the stock price seems to be justfied. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Mohawk Industries’s ratio of 8.01x is trading slightly above its industry peers’ ratio of 7.93x, which means if you buy Mohawk Industries today, you’d be paying a relatively sensible price for it. And if you believe Mohawk Industries should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. Although, there may be an opportunity to buy in the future. This is because Mohawk Industries’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.
What does the future of Mohawk Industries 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. Mohawk Industries’ earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? MHK’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at MHK? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?
Are you a potential investor? If you’ve been keeping an eye on MHK, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for MHK, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
It can be quite valuable to consider what analysts expect for Mohawk Industries from their most recent forecasts. At Simply Wall St, we have the analysts estimates which you can view by clicking here.
If you are no longer interested in Mohawk Industries, 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.