Ten Entertainment Group Plc (LSE:TEG), a GBP£170.30M small-cap, operates in the consumer discretionary industry, whose performance is predominantly driven by consumer confidence. Macro elements tend to determine how fast, and how often, consumers buy leisure products. Consumer discretionary analysts are forecasting for the entire industry, a positive double-digit growth of 11.25% in the upcoming year , and an optimistic near-term growth of 21.86% over the next couple of years. This rate is larger than the growth rate of the UK stock market as a whole. Today, I’ll take you through the sector growth expectations, as well as evaluate whether Ten Entertainment Group is lagging or leading in the industry. View our latest analysis for Ten Entertainment Group
What’s the catalyst for Ten Entertainment Group’s sector growth?
Rising competition for consumer attention from new activities such as online streaming and mobile games has forced traditional incumbents to adapt or fall behind. However, the leisure service industry as a whole has been expanding. Over the past year, the industry saw growth of 9.95%, though still underperforming the wider UK stock market. Ten Entertainment Group lags the pack with its negative growth rate of -4.70% over the past year, which indicates the company will be growing at a slower pace than its leisure peers. Moreover, the trend of below-industry growth rate is expected to continue in the future with Ten Entertainment Group poised to deliver a -55.89% growth compared to the industry average growth rate of 11.25%.
Is Ten Entertainment Group and the sector relatively cheap?
Leisure companies are typically trading at a PE of 20x, in-line with the UK stock market PE of 18x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. However, the industry returned a lower 10.31% compared to the market’s 12.77%, potentially indicative of past headwinds. On the stock-level, Ten Entertainment Group is trading at a lower PE ratio of 2x, making it cheaper than the average leisure stock. In terms of returns, Ten Entertainment Group generated 163.15% in the past year, which is 152.84% over the leisure sector.
What this means for you:
Are you a shareholder? Ten Entertainment Group is a leisure industry laggard in terms of its future growth outlook. This is possibly reflected in the PE ratio, with the stock trading below its peers. If you’re bullish on the stock and well-diversified by industry, you may decide to hold onto Ten Entertainment Group as part of your portfolio, or maybe increase your holding. If you’re bearish on the stock, now may not be the best time to sell!
Are you a potential investor? If Ten Entertainment Group has been on your watchlist for a while, now may be the time to dig deeper into the stock. Although the market is expecting lower growth for the company relative to its peers, Ten Entertainment Group is also trading at a discount, meaning that there could be some value from a potential mispricing. However, before you make a decision on the stock, I suggest you look at Ten Entertainment Group’s other important fundamentals such as the company’s financial health in order to build a holistic investment thesis.
For a deeper dive into Ten Entertainment Group’s stock, take a look at the company’s latest free analysis report to find out more on its financial health and other fundamentals. Interested in other consumer discretionary stocks instead? Use our free playform to see my list of over 100 other consumer discretionary companies trading on the market.
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.