Dave & Buster's Entertainment, Inc. (NASDAQ:PLAY), which is in the hospitality business, and is based in United States, saw a decent share price growth in the teens level on the NASDAQGS over the last few months. With many analysts covering the 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? Today I will analyse the most recent data on Dave & Buster's Entertainment’s outlook and valuation to see if the opportunity still exists.
What is Dave & Buster's Entertainment worth?
Good news, investors! Dave & Buster's Entertainment is still a bargain right now. 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 Dave & Buster's Entertainment’s ratio of 13.86x is below its peer average of 23.35x, which suggests the stock is undervalued compared to the Hospitality industry. Another thing to keep in mind is that Dave & Buster's Entertainment’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.
What kind of growth will Dave & Buster's Entertainment generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 -3.4% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Dave & Buster's Entertainment. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? Although PLAY is currently undervalued, the negative 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 PLAY, 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 PLAY for some time, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Dave & Buster's Entertainment. You can find everything you need to know about Dave & Buster's Entertainment in the latest infographic research report. If you are no longer interested in Dave & Buster's Entertainment, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.