Great Canadian Gaming Corporation (TSE:GC), which is in the hospitality business, and is based in Canada, saw significant share price movement during recent months on the TSX, rising to highs of CA$55.77 and falling to the lows of CA$48.63. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Great Canadian Gaming's current trading price of CA$50.78 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Great Canadian Gaming’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What is Great Canadian Gaming worth?
According to my relative valuation model, the stock seems to be currently fairly priced. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 20.42x is currently trading slightly above its industry peers’ ratio of 20.2x, which means if you buy Great Canadian Gaming today, you’d be paying a relatively reasonable price for it. And if you believe Great Canadian Gaming should be trading in this range, then there isn’t really any room for the share price grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since Great Canadian Gaming’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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 does the future of Great Canadian Gaming look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Great Canadian Gaming’s earnings over the next few years are expected to increase by 30%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has already priced in GC’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at GC? Will you have enough conviction to buy should the price fluctuate below the true value?
Are you a potential investor? If you’ve been keeping tabs on GC, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for GC, 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.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Great Canadian Gaming. You can find everything you need to know about Great Canadian Gaming in the latest infographic research report. If you are no longer interested in Great Canadian Gaming, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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If you spot an error that warrants correction, please contact the editor at email@example.com. 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.