Good Times Restaurants Inc (NASDAQ:GTIM), a hospitality company based in United States, saw a decent share price growth in the teens level on the NasdaqCM over the last few months. As a small cap stock, which tends to lack high analyst coverage, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s take a look at Good Times Restaurants’s outlook and value based on the most recent financial data to see if the opportunity still exists. Check out our latest analysis for Good Times Restaurants
What’s the opportunity in Good Times Restaurants?
According to my relative valuation model, the stock seems to be currently fairly priced. In this instance, I’ve used the price-to-book (PB) ratio given that there is not enough information to reliably forecast the stock’s cash flows, and its earnings doesn’t seem to reflect its true value. I find that Good Times Restaurants’s ratio of 1.27x is trading slightly below its industry peers’ ratio of 2.41x, which means if you buy Good Times Restaurants today, you’d be paying a relatively fair price for it. And if you believe Good Times Restaurants should be trading in this range, then there isn’t much room for the share price grow beyond what it’s currently trading. In addition to this, it seems like Good Times Restaurants’s share price is quite stable, which could mean 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.
What does the future of Good Times Restaurants look like?
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. Good Times Restaurants’s earnings over the next few years are expected to increase by 71.17%, 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? It seems like the market has already priced in GTIM’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 GTIM? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping tabs on GTIM, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for GTIM, 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.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Good Times Restaurants. You can find everything you need to know about Good Times Restaurants in the latest infographic research report. If you are no longer interested in Good Times Restaurants, 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.