When Should You Buy Waterloo Brewing Ltd. (TSE:WBR)?
While Waterloo Brewing Ltd. (TSE:WBR) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the TSX, rising to highs of CA$4.52 and falling to the lows of CA$3.00. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Waterloo Brewing's current trading price of CA$3.21 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Waterloo Brewing’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
View our latest analysis for Waterloo Brewing
Is Waterloo Brewing Still Cheap?
According to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Waterloo Brewing’s ratio of 77.18x is above its peer average of 33.91x, which suggests the stock is trading at a higher price compared to the Beverage industry. Another thing to keep in mind is that Waterloo Brewing’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards the levels of its industry peers over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard for it to fall back down into an attractive buying range again.
What kind of growth will Waterloo Brewing generate?
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. 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 revenues expected to grow by a double-digit 12% in the upcoming year, the outlook is positive for Waterloo Brewing. If the level of expenses is able to be maintained, 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? It seems like the market has well and truly priced in WBR’s positive outlook, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe WBR should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio 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 WBR 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 positive outlook is encouraging for WBR, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
If you want to dive deeper into Waterloo Brewing, you'd also look into what risks it is currently facing. Our analysis shows 4 warning signs for Waterloo Brewing (2 are a bit concerning!) and we strongly recommend you look at these before investing.
If you are no longer interested in Waterloo Brewing, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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.
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