Should You Think About Buying Vista Outdoor Inc. (NYSE:VSTO …

Vista Outdoor Inc. (NYSE:VSTO), 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 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 Vista Outdoor’s valuation and outlook in more detail to determine if there’s still a bargain opportunity. See our latest analysis for Vista Outdoor

Is Vista Outdoor Still Cheap?

Great news for investors – Vista Outdoor is still trading at a fairly cheap price according to my price multiple model, where I compare the company’s price-to-earnings ratio to the industry average. 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 Vista Outdoor’s ratio of 3.84x is below its peer average of 11.1x, which indicates the stock is trading at a lower price compared to the Leisure industry. What’s more interesting is that, Vista Outdoor’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to move closer to its industry peers, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from Vista Outdoor?

earnings-and-revenue-growthNYSE:VSTO Earnings and Revenue Growth March 31st 2023

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. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Vista Outdoor, at least in the near future.

What This Means For You

Are you a shareholder? Although VSTO is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk.

Consider whether you want to increase your portfolio exposure to VSTO, or whether diversifying into another stock may be a better move for your total risk and return. Are you a potential investor? If you’ve been keeping an eye on VSTO for a while, but hesitant on making the leap, I recommend you research further into the stock. Given its current price multiple, now is a great time to make a decision.

But keep in mind the risks that come with negative growth prospects in the future. In light of this, if you’d like to do more analysis on the company, it’s vital to be informed of the risks involved. For instance, we’ve identified 2 warning signs for Vista Outdoor (1 shouldn’t be ignored) you should be familiar with.

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

Valuation is complex, but we’re helping make it simple.

Find out whether Vista Outdoor is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. 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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