Covenant Logistics Group, Inc. (NYSE:CVLG), is not the largest company out there, but it led the NYSE gainers with a relatively large price hike in the past couple of weeks. While good news for shareholders, the company has traded much higher in the past year. As a small cap stock, which tends to lack high analyst coverage, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s take a look at Covenant Logistics Group’s outlook and value based on the most recent financial data to see if the opportunity still exists.

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What's The Opportunity In Covenant Logistics Group?

Good news, investors! Covenant Logistics Group is still a bargain right now according to our price multiple model, which compares the company's price-to-earnings ratio to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. we find that Covenant Logistics Group’s ratio of 19.41x is below its peer average of 26.84x, which indicates the stock is trading at a lower price compared to the Transportation industry. What’s more interesting is that, Covenant Logistics Group’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Check out our latest analysis for Covenant Logistics Group

Can we expect growth from Covenant Logistics Group?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by 64% over the next year, the near-term future seems bright for Covenant Logistics Group. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? Since CVLG is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. With an optimistic profit outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on CVLG for a while, now might be the time to make a leap. Its buoyant future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy CVLG. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.

So while earnings quality is important, it's equally important to consider the risks facing Covenant Logistics Group at this point in time. While conducting our analysis, we found that Covenant Logistics Group has 2 warning signs and it would be unwise to ignore them.

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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.