Now is there an opportunity in Summerset Group Holdings Limited (NZSE: SUM)?
While Summerset Group Holdings Limited (NZSE: SUM) may not be the most well-known stock right now, it saw a double-digit rise in the share price of more than 10% over the course of of the last two months on the NZSE. As a mid-cap stock with high analyst coverage, you can assume that any recent changes in the outlook for the company are already built into the stock price. However, what if the stock is still a good deal? Let’s take a look at the outlook and value of Summerset Group Holdings based on the most recent financial data to see if the opportunity still exists.
Check out our latest analysis for Summerset Group Holdings
Is Summerset Group Holdings Still Cheap?
The stock price looks reasonable at the moment based on my multiple price model, where I compare the company’s price-to-earnings ratio to the industry average. I used the price / earnings ratio in this case because there is not enough visibility to forecast its cash flow. The stock’s 12.59x ratio is currently trading slightly below the 13.99x ratio of its industry peers, meaning if you buy Summerset Group Holdings today, you’ll pay a decent price for it. And if you think Summerset Group Holdings should be trading within that range, then there isn’t much room for the stock price to rise above the levels of other industry peers over the long term. In addition, Summerset Group Holdings’ share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This can mean that the stock is less likely to fall due to natural market volatility, suggesting fewer buying opportunities in the future.
What kind of growth will Summerset Group Holdings generate?
Future prospects are an important aspect when considering buying a stock, especially if you are an investor looking to grow your portfolio. Buying a large business with a solid outlook for a cheap price is always a good investment, so let’s take a look at the future expectations of the business as well. Although in the case of Summerset Group Holdings, it is expected to post negative profit growth of -7.6%, which does not help to strengthen its investment thesis. The risk of future uncertainty appears to be high, at least in the short term.
What this means for you:
Are you a shareholder? The SUM currently appears close to that of its industry peers, but given the uncertainty of negative returns going forward, this might be a good time to reduce your portfolio risk. Is your current equity exposure optimal for your entire portfolio? And is the opportunity cost of owning a negative outlook stock too high? Before making a decision on SUM, check if its fundamentals have changed.
Are you a potential investor? If you’ve been keeping your eye on SUM for a while, this might not be the most optimal time to buy, given that it is trading around industry price multiples. This means that there are fewer advantages to bad pricing. In addition, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors that we haven’t considered today that can help crystallize your take on SUM if the price moves below the industry PE ratio.
So, if you want to dig deeper into this title, it is crucial to take into account the risks it faces. Concrete example: we have spotted 4 warning signs for Summerset Group Holdings you should pay attention and 2 of them make us uncomfortable.
If you’re no longer interested in Summerset Group Holdings, you can use our free platform to view our list of over 50 other high growth stocks.
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This Simply Wall St article is general in nature. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.
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