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What Does SKY Network Television Limited's (NZSE:SKT) Share Price Indicate?

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Simply Wall St
·4 min read
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SKY Network Television Limited (NZSE:SKT), is not the largest company out there, but it saw a double-digit share price rise of over 10% in the past couple of months on the NZSE. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Today I will analyse the most recent data on SKY Network Television’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for SKY Network Television

Is SKY Network Television still cheap?

According to my valuation model, SKY Network Television seems to be fairly priced at around 5.8% below my intrinsic value, which means if you buy SKY Network Television today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth NZ$0.19, then there isn’t much room for the share price grow beyond what it’s currently trading. So, is there another chance to buy low in the future? Given that SKY Network Television’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from SKY Network Television?

earnings-and-revenue-growth
earnings-and-revenue-growth

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 matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with an expected decline of -8.2% in revenues over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for SKY Network Television. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? Currently, SKT appears to be trading around its fair value, 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 SKT for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The stock appears 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 SKT should the price fluctuate below its true value.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Every company has risks, and we've spotted 1 warning sign for SKY Network Television you should know about.

If you are no longer interested in SKY Network Television, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.