Yahoo Finance Should You Investigate J D Wetherspoon plc (LON:JDW) At UK£5.80?
J D Wetherspoon plc (LON:JDW), is not the largest company out there, but it led the LSE gainers with a relatively large price hike in the past couple of weeks. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s examine J D Wetherspoon’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Check out our latest analysis for J D Wetherspoon
Is J D Wetherspoon Still Cheap?
J D Wetherspoon appears to be expensive according to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and 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 38.15x is currently well-above the industry average of 19.21x, meaning that it is trading at a more expensive price relative to its peers. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since J D Wetherspoon’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. 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 does the future of J D Wetherspoon 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. J D Wetherspoon's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? It seems like the market has well and truly priced in JDW’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe JDW 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 tabs on JDW for some time, 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 JDW, 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 J D Wetherspoon as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 2 warning signs for J D Wetherspoon you should be mindful of and 1 of these doesn't sit too well with us.
If you are no longer interested in J D Wetherspoon, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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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