While SKY Network Television Limited (NZSE:SKT) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the NZSE over the last few months, increasing to NZ$2.34 at one point, and dropping to the lows of NZ$2.11. 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 SKY Network Television's current trading price of NZ$2.27 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 SKY Network Television’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is SKY Network Television Still Cheap?
According to my valuation model, the stock is currently overvalued by about 31%, trading at NZ$2.27 compared to my intrinsic value of NZ$1.73. This means that the opportunity to buy SKY Network Television at a good price has disappeared! If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that SKY Network Television’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.
What kind of growth will SKY Network Television 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. 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. However, with a negative profit growth of -11% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for SKY Network Television. This certainty tips the risk-return scale towards higher risk.
What This Means For You
Are you a shareholder? If you believe SKT is currently trading above its value, selling high and buying it back up again when its price falls towards its real value can be profitable. Given the risk from a negative growth outlook, 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 tabs on SKT for some time, 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?
So while earnings quality is important, it's equally important to consider the risks facing SKY Network Television at this point in time. When we did our research, we found 3 warning signs for SKY Network Television (1 doesn't sit too well with us!) that we believe deserve your full attention.
If you are no longer interested in SKY Network Television, 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.
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