Laboratory Corporation of America Holdings (NYSE:LH) received a lot of attention from a substantial price increase on the NYSE over the last few months. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s examine Laboratory Corporation of America Holdings’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
View our latest analysis for Laboratory Corporation of America Holdings
What is Laboratory Corporation of America Holdings worth?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 18% below my intrinsic value, which means if you buy Laboratory Corporation of America Holdings today, you’d be paying a reasonable price for it. And if you believe the company’s true value is $291.56, then there isn’t much room for the share price grow beyond what it’s currently trading. So, is there another chance to buy low in the future? Given that Laboratory Corporation of America Holdings’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from Laboratory Corporation of America Holdings?
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. Though in the case of Laboratory Corporation of America Holdings, it is expected to deliver a negative earnings growth of -18%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What this means for you:
Are you a shareholder? LH seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on LH for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on LH should the price fluctuate below its true value.
Keep in mind, when it comes to analysing a stock it’s worth noting the risks involved. For example, Laboratory Corporation of America Holdings has 4 warning signs (and 1 which shouldn’t be ignored) we think you should know about.
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This article by Simply Wall St is general in nature. 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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