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Why Nine Entertainment Co. Holdings Limited (ASX:NEC) Could Be Worth Watching

While Nine Entertainment Co. Holdings Limited (ASX:NEC) might not be the most widely known stock at the moment, it saw a double-digit share price rise of over 10% in the past couple of months on the ASX. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s take a look at Nine Entertainment Holdings’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Nine Entertainment Holdings

Is Nine Entertainment Holdings Still Cheap?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. 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 11.83x is trading slightly below its industry peers’ ratio of 12.93x, which means if you buy Nine Entertainment Holdings today, you’d be paying a decent price for it. And if you believe that Nine Entertainment Holdings should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. In addition to this, it seems like Nine Entertainment Holdings’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.

What does the future of Nine Entertainment Holdings look like?

earnings-and-revenue-growth
earnings-and-revenue-growth

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. With profit expected to grow by 22% over the next couple of years, the future seems bright for Nine Entertainment Holdings. 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? It seems like the market has already priced in NEC’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at NEC? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

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Are you a potential investor? If you’ve been keeping an eye on NEC, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for NEC, which means it’s worth further examining other factors such as the strength of its balance sheet, 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. Every company has risks, and we've spotted 1 warning sign for Nine Entertainment Holdings you should know about.

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.

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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