Yahoo Finance When Should You Buy Shoe Zone plc (LON:SHOE)?
While Shoe Zone plc (LON:SHOE) might not have the largest market cap around , it received a lot of attention from a substantial price movement on the AIM over the last few months, increasing to UK£2.85 at one point, and dropping to the lows of UK£1.60. 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 Shoe Zone's current trading price of UK£1.73 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 Shoe Zone’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
View our latest analysis for Shoe Zone
What's The Opportunity In Shoe Zone?
Shoe Zone appears to be overvalued by 34% at the moment, based on our discounted cash flow valuation. The stock is currently priced at UK£1.73 on the market compared to our intrinsic value of £1.29. This means that the buying opportunity has probably disappeared for now. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Shoe Zone’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from Shoe Zone?
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. Though in the case of Shoe Zone, it is expected to deliver a highly negative earnings growth in the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What This Means For You
Are you a shareholder? If you believe SHOE 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. Given the uncertainty from negative growth in the future, this could be the right time to reduce your total portfolio risk. 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 SHOE for a while, now may not be the best time to enter into the stock. Its price has risen beyond its true value, on top of a negative future outlook. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Should the price fall in the future, will you be well-informed enough to buy?
If you'd like to know more about Shoe Zone as a business, it's important to be aware of any risks it's facing. To that end, you should learn about the 3 warning signs we've spotted with Shoe Zone (including 1 which can't be ignored).
If you are no longer interested in Shoe Zone, 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.
