Is Limoneira (NASDAQ: LMNR) Undervalued or Overvalued?
Today is Thursday, September 5, 2019 and here’s your daily small cap valuation.
Limoneira (NASDAQ: LMNR) is a small-cap stock that could have a lot of potential. But it’s hard to value smaller companies like this. Conventional valuation metrics like price-to-earnings (P/E) ratio, profit margin, and return on equity (ROE) may not be available for them.
To get a sense of Limoneira's true valuation, let’s compare it to its industry peers — and to itself one year ago. We’ll look at four small cap valuation metrics…
Price-to-Book Value (P/B) Ratio
Limoneira's price-to-book value (P/B) ratio of 1.583 is 1.93% higher than its industry average of 1.553. That’s not good. A high P/B ratio may indicate that there’s something wrong with the company’s balance sheet — or that the stock is trading for an unusually high price based on its balance sheet.
Free Cash Flow Yield (FCF/Enterprise Value)
Limoneira's free cash flow yield (FCF/EV) of -0.30% is 109.71% lower than its industry average of 3.09%. That’s not good. This metric compares free cash flow (the amount of cash left over after all expenses and capital expenditures have been paid) with enterprise value (a comprehensive alternative to market cap that includes cash and debt).
A low free cash flow yield indicates that a company is performing inefficiently — or that it’s struggling with the debt on its books.
Earnings per Share (EPS) Growth
Limoneira has not grown its earnings per share (EPS) in the last year. That’s not good. Negative earnings aren’t the end of the world — they’re fairly common among smaller, newer companies — but if earnings are falling over time, that’s definitely a bad sign.
Gross Margin Growth
Limoneira has not grown its gross margin in the last year. That’s not good. It indicates that the company is making less money from its operations over time.
Limoneira scored favorably on 0 of our 4 valuation metrics. With this in mind, we believe the stock is very overvalued.
Editor’s Note: We’ve been keeping an eye on a set of small-cap stocks that are a better value than Limoneira. These stocks have the potential for bigger gains — and they’re far less risky than the speculative small caps many investors gamble on. Enter your email below to learn more.
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