Why InterContinental Hotels Group PLC (LON:IHG) Could Be Worth Watching
Today we're going to take a look at the well-established InterContinental Hotels Group PLC (LON:IHG). The company's stock saw significant share price movement during recent months on the LSE, rising to highs of UK£52.66 and falling to the lows of UK£47.81. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether InterContinental Hotels Group's current trading price of UK£51.70 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at InterContinental Hotels Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
See our latest analysis for InterContinental Hotels Group
What's the opportunity in InterContinental Hotels Group?
The stock is currently trading at UK£51.70 on the share market, which means it is overvalued by 26% compared to my intrinsic value of £40.88. This means that the opportunity to buy InterContinental Hotels Group at a good price has disappeared! Another thing to keep in mind is that InterContinental Hotels Group’s share price is quite stable relative to 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.
Can we expect growth from InterContinental Hotels Group?
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. 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. With revenues expected to grow by a double-digit 15% over the next couple of years, the outlook is positive for InterContinental Hotels Group. If the level of expenses is able to be maintained, it looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in IHG’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe IHG 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 IHG 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 is encouraging for IHG, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, we've found that InterContinental Hotels Group has 2 warning signs (1 is a bit unpleasant!) that deserve your attention before going any further with your analysis.
If you are no longer interested in InterContinental Hotels Group, 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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