Is Restaurant Brands New Zealand Limited (NZSE:RBD) Potentially Undervalued?
While Restaurant Brands New Zealand Limited (NZSE:RBD) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the NZSE over the last few months, increasing to NZ$9.91 at one point, and dropping to the lows of NZ$6.90. 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 Restaurant Brands New Zealand's current trading price of NZ$7.33 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Restaurant Brands New Zealand’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
View our latest analysis for Restaurant Brands New Zealand
Is Restaurant Brands New Zealand Still Cheap?
The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. 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 28x is currently trading slightly above its industry peers’ ratio of 25.79x, which means if you buy Restaurant Brands New Zealand today, you’d be paying a relatively reasonable price for it. And if you believe that Restaurant Brands New Zealand should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. In addition to this, it seems like Restaurant Brands New Zealand’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.
Can we expect growth from Restaurant Brands New Zealand?
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. Restaurant Brands New Zealand's earnings over the next few years are expected to increase by 65%, 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? RBD’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. 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 RBD? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?
Are you a potential investor? If you’ve been keeping tabs on RBD, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for RBD, 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.
In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Be aware that Restaurant Brands New Zealand is showing 3 warning signs in our investment analysis and 2 of those make us uncomfortable...
If you are no longer interested in Restaurant Brands New Zealand, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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