NII Holdings Inc (NASDAQ:NIHD), a wireless telcom company based in United States, led the NasdaqGS gainers with a relatively large price hike in the past couple of weeks. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine NII Holdings’s valuation and outlook in more detail to determine if there’s still a bargain opportunity. See our latest analysis for NII Holdings
What’s the opportunity in NII Holdings?
NII Holdings is currently overpriced based on my relative valuation model. In this instance, I’ve used price-to-book ratio (PB) ratio given that there is not enough information to reliably forecast the stock’s cash flows, and its earnings doesn’t seem to reflect its true value. I find that NII Holdings’s ratio of 35.42x is above its peer average of 2.74x, which suggests the stock is overvalued compared to the wireless telcom industry. But, is there another opportunity to buy low in the future? Since NII Holdings’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. 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.
Can we expect growth from NII Holdings?
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. With profit expected to grow by 48.88% over the next couple of years, the future seems bright for NII Holdings. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? NII Holdings’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe NII Holdings should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on NII Holdings for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for NII Holdings, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on NII Holdings. You can find everything you need to know about NII Holdings in the latest infographic research report. If you are no longer interested in NII Holdings, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.