Should You Think About Buying Tabcorp Holdings Limited (ASX:TAH) Now?
Tabcorp Holdings Limited (ASX:TAH), might not be a large cap stock, but it saw a double-digit share price rise of over 10% in the past couple of months on the ASX. 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. But what if there is still an opportunity to buy? Let’s examine Tabcorp Holdings’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
View our latest analysis for Tabcorp Holdings
What's the opportunity in Tabcorp Holdings?
Tabcorp Holdings appears to be overvalued by 26% at the moment, based on my discounted cash flow valuation. The stock is currently priced at AU$3.84 on the market compared to my intrinsic value of A$3.06. Not the best news for investors looking to buy! If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since Tabcorp Holdings’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. 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.
Can we expect growth from Tabcorp Holdings?
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. However, with a relatively muted revenue growth of 7.3% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Tabcorp Holdings, at least in the short term.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in TAH’s future outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe TAH should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on TAH for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
So while earnings quality is important, it's equally important to consider the risks facing Tabcorp Holdings at this point in time. To that end, you should learn about the 2 warning signs we've spotted with Tabcorp Holdings (including 1 which is potentially serious).
If you are no longer interested in Tabcorp Holdings, 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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