Let’s talk about the popular InterContinental Hotels Group PLC (LON:IHG). The company’s shares received a lot of attention from a substantial price movement on the LSE over the last few months, increasing to £48.3 at one point, and dropping to the lows of £39.48. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether InterContinental Hotels Group’s current trading price of £42.23 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.
What is InterContinental Hotels Group worth?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 9.2% below my intrinsic value, which means if you buy InterContinental Hotels Group today, you’d be paying a fair price for it. And if you believe the company’s true value is £46.51, then there isn’t much room for the share price grow beyond what it’s currently trading. Although, there may be an opportunity to buy in the future. This is because InterContinental Hotels Group’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
Can we expect growth from InterContinental Hotels Group?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 a double-digit 15% over the next couple of years, the outlook is positive for InterContinental Hotels 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? IHG’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping an eye on IHG, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on InterContinental Hotels Group. You can find everything you need to know about InterContinental Hotels Group in the latest infographic research report. If you are no longer interested in InterContinental Hotels Group, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.