Is It Time To Buy Synlait Milk Limited (NZE:SML)?
Synlait Milk Limited (NZSE:SML), a food company based in New Zealand, received a lot of attention from a substantial price increase on the NZSE 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, could the stock still be trading at a relatively cheap price? Let’s take a look at Synlait Milk’s outlook and value based on the most recent financial data to see if the opportunity still exists. See our latest analysis for Synlait Milk
What’s the opportunity in Synlait Milk?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 20% above my intrinsic value, which means if you buy Synlait Milk today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is NZ$6.75, then there isn’t really any room for the share price grow beyond what it’s currently trading. Furthermore, it seems like Synlait Milk’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.
Can we expect growth from Synlait Milk?
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. Synlait Milk’s earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger 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 SML’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 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 SML, now may not be the most optimal 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 further examining 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 Synlait Milk. You can find everything you need to know about Synlait Milk in the latest infographic research report. If you are no longer interested in Synlait Milk, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
