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Is Now An Opportune Moment To Examine World Wrestling Entertainment, Inc. (NYSE:WWE)?

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Simply Wall St
·3 min read
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World Wrestling Entertainment, Inc. (NYSE:WWE), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the NYSE 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 World Wrestling Entertainment’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for World Wrestling Entertainment

Is World Wrestling Entertainment still cheap?

Great news for investors – World Wrestling Entertainment is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that World Wrestling Entertainment’s ratio of 18.85x is below its peer average of 30.57x, which indicates the stock is trading at a lower price compared to the Entertainment industry. What’s more interesting is that, World Wrestling Entertainment’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 does the future of World Wrestling Entertainment look like?

earnings-and-revenue-growth
earnings-and-revenue-growth

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. 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 a negative profit growth of -3.0% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for World Wrestling Entertainment. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? Although WWE is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. I recommend you think about whether you want to increase your portfolio exposure to WWE, 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 WWE for some time, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. At Simply Wall St, we found 2 warning signs for World Wrestling Entertainment and we think they deserve your attention.

If you are no longer interested in World Wrestling 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.