Why Best Buy Co Inc (BBY) Could Be A Buy
Best Buy Co Inc (NYSE:BBY) led the NYSE gainers with a relatively large price hike in the past couple of weeks. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s examine BBY’s valuation and outlook in more detail to determine if there’s still a bargain opportunity. View our latest analysis for Best Buy
What is BBY worth?
According to my valuation model, BBY seems to be fairly priced at around 4% below my intrinsic value, which means if you buy BBY today, you’d be paying a reasonable price for it. And if you believe that BBY is really worth $66.24, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that BBY’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from BBY?
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. Though in the case of BBY, it is expected to deliver a negative earnings growth of -2.03%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What this means for you:
Are you a shareholder? BBY seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on BBY, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on BBY for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on BBY should the price fluctuate below its true value.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Best Buy. You can find everything you need to know about BBY in the latest infographic research report. If you are no longer interested in Best Buy, 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.
