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Barnes & Noble Education, Inc. (NYSE:BNED), which is in the specialty retail business, and is based in United States, saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. 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? Today I will analyse the most recent data on Barnes & Noble Education’s outlook and valuation to see if the opportunity still exists.
What is Barnes & Noble Education worth?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 9.39% above my intrinsic value, which means if you buy Barnes & Noble Education today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth $2.97, there’s only an insignificant downside when the price falls to its real value. Is there another opportunity to buy low in the future? Since Barnes & Noble Education’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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.
What does the future of Barnes & Noble Education look like?
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 Barnes & Noble Education, it is expected to deliver a negative revenue growth of -4.3% next year, 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? BNED seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock optimal 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 an eye on BNED for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, 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 BNED should the price fluctuate below its true value.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Barnes & Noble Education. You can find everything you need to know about Barnes & Noble Education in the latest infographic research report. If you are no longer interested in Barnes & Noble Education, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.