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Event Hospitality & Entertainment Limited (ASX:EVT), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the ASX over the last few months. 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. However, what if the stock is still a bargain? Let’s take a look at Event Hospitality & Entertainment’s outlook and value based on the most recent financial data to see if the opportunity still exists.
What's the opportunity in Event Hospitality & Entertainment?
According to my valuation model, Event Hospitality & Entertainment seems to be fairly priced at around 4.4% below my intrinsic value, which means if you buy Event Hospitality & Entertainment today, you’d be paying a reasonable price for it. And if you believe the company’s true value is A$9.02, then there’s not much of an upside to gain from mispricing. Furthermore, Event Hospitality & Entertainment’s low beta implies that the stock is less volatile than the wider market.
Can we expect growth from Event Hospitality & Entertainment?
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. With revenues expected to grow by 36% over the next couple of years, the future seems bright for Event Hospitality & Entertainment. 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? EVT’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping an eye on EVT, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. You'd be interested to know, that we found 1 warning sign for Event Hospitality & Entertainment and you'll want to know about it.
If you are no longer interested in Event Hospitality & Entertainment, 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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