Groupon, Inc. (NASDAQ:GRPN), which is in the online retail business, and is based in United States, saw a decent share price growth in the teens level on the NASDAQGS 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 examine Groupon’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Is Groupon still cheap?
Good news, investors! Groupon is still a bargain right now. According to my valuation, the intrinsic value for the stock is $4.6, but it is currently trading at US$3.56 on the share market, meaning that there is still an opportunity to buy now. What’s more interesting is that, Groupon’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. 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.
What kind of growth will Groupon generate?
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. However, with an expected decline of -5.1% in revenues over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Groupon. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? Although GRPN is currently undervalued, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to GRPN, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping tabs on GRPN for some time, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Groupon. You can find everything you need to know about Groupon in the latest infographic research report. If you are no longer interested in Groupon, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.