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Southern Cross Media Group Limited (ASX:SXL), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the ASX over the last few months, increasing to AU$2.08 at one point, and dropping to the lows of AU$1.44. 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 Southern Cross Media Group's current trading price of AU$1.46 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Southern Cross Media Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What is Southern Cross Media Group worth?
Good news, investors! Southern Cross Media Group is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 11.76x is currently well-below the industry average of 18.95x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, Southern Cross Media Group’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What kind of growth will Southern Cross Media Group generate?
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 profit expected to grow by 63% over the next couple of years, the future seems bright for Southern Cross Media Group. 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? Since SXL is currently below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current price multiple.
Are you a potential investor? If you’ve been keeping an eye on SXL for a while, now might be the time to make a leap. Its buoyant future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy SXL. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed assessment.
With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. You'd be interested to know, that we found 3 warning signs for Southern Cross Media Group and you'll want to know about these.
If you are no longer interested in Southern Cross Media Group, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.