Yahoo Finance When Should You Buy Nine Entertainment Co. Holdings Limited (ASX:NEC)?
Nine Entertainment Co. Holdings Limited (ASX:NEC), is not the largest company out there, but it saw a decent share price growth in the teens level on the ASX over the last few months. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s examine Nine Entertainment Holdings’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Check out our latest analysis for Nine Entertainment Holdings
Is Nine Entertainment Holdings still cheap?
According to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. 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 Nine Entertainment Holdings’s ratio of 30.68x is above its peer average of 19.22x, which suggests the stock is trading at a higher price compared to the Media industry. Another thing to keep in mind is that Nine Entertainment Holdings’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 the levels of its industry peers 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 for it to fall back down into an attractive buying range again.
What does the future of Nine Entertainment Holdings look like?
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. Nine Entertainment Holdings' earnings over the next few years are expected to increase by 91%, 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? NEC’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe NEC should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio 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 NEC for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for NEC, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
If you'd like to know more about Nine Entertainment Holdings as a business, it's important to be aware of any risks it's facing. In terms of investment risks, we've identified 2 warning signs with Nine Entertainment Holdings, and understanding them should be part of your investment process.
If you are no longer interested in Nine Entertainment Holdings, 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. 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.
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