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Super Retail Group Limited (ASX:SUL), is not the largest company out there, but it received a lot of attention from a substantial price increase on the ASX over the last few months. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Super Retail Group’s outlook and value based on the most recent financial data to see if the opportunity still exists.
What's the opportunity in Super Retail Group?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 8.28% above my intrinsic value, which means if you buy Super Retail Group today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth A$11.93, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because Super Retail Group’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What does the future of Super Retail Group look like?
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. Though in the case of Super Retail Group, it is expected to deliver a negative earnings growth of -12%, 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? SUL seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in 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 SUL for a while, now may not be the most optimal 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 crystalize your views on SUL should the price fluctuate below its true value.
If you want to dive deeper into Super Retail Group, you'd also look into what risks it is currently facing. For example, we've found that Super Retail Group has 3 warning signs (1 can't be ignored!) that deserve your attention before going any further with your analysis.
If you are no longer interested in Super Retail Group, 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.
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