Vince Holding Corp. (NYSE: VNCE) investors have enjoyed seeing the stock price increase by 76.1% over the last month. As a small-cap stock, hardly covered by analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. However, could the stock still be trading at a relatively cheap price? Let’s take a look at the company’s expected growth and valuation based on its most recent financial data to see if there is further upside moving forward.
What’s The Opportunity In Vince?
According to our 4 valuation models, Vince seems to be fairly priced in the market at 3.6% above its intrinsic value. Meaning if you buy Vince today, you’d be paying a reasonable price for it. If you believe the company’s fair value is $15.53, then there’s not significant upside to be gained from mispricing.
|Analysis||Model Fair Value||Upside (Downside)|
|10-yr DCF Revenue Exit||$5.80||-64.0%|
|5-yr DCF Revenue Exit||$12.86||-20.2%|
|Peer Revenue Multiples||$23.26||44.4%|
|Earnings Power Value||$20.19||25.3%|
Click on any of the analyses above to view the latest model with real-time data.
In addition, it seems like Vince’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its beta of 0.96.
Can We Expect Growth From Vince?
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 matters the most, a more compelling investment thesis would be high growth potential at a cheap price.
source: finbox.io data explorer
Vince’s earnings growth is expected to average -29.8% over the next five fiscal years. This could indicate that the core business is not doing very well or that margins are coming under pressure.
What This Means For Investors
Growth investors typically look to invest in companies that are expanding sales, gaining market share and building customer bases. On the other hand, value investors often argue that the most successful investments are in companies that deliver the highest cash flows while trading at the lowest valuation.
But why not put those hands together? A company that has both growth and value characteristics would certainly make the most attractive investment. So what did we find out about Vince?
Vince’s future growth is relatively low and the stock appears fairly valued at the moment according to our valuation models. As a shareholder, you may have already conducted your fundamental analysis on the company and the stock’s recent appreciation may have been expected. Therefore, it may be time for investors to take some chips off the table. For prospective investors looking to purchase shares of Vince, it may be worth holding off until the stock develops a larger margin of safety.
It is important to note that there are a variety of other fundamental factors that I have not taken into consideration in this article. If you have not done so already, I highly recommend that you complete your research on Vince by taking a look at the following:
Valuation Metrics: what is Vince’s EBITDA less CapEx multiple and how does it compare to its peers? This is a helpful multiple to analyze when comparing capital intensive businesses. View the company’s EBITDA less CapEx multiple here.
Risk Metrics: what is Vince’s asset efficiency? This ratio measures the amount of cash flow that a company generates from its assets. View the company’s asset efficiency here.
Efficiency Metrics: is management becoming more or less efficient in creating value for the firm? Find out by analyzing the company’s return on invested capital ratio here.
As of this writing, I did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.