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While Seven West Media Limited (ASX:SWM) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the ASX over the last few months, increasing to AU$0.47 at one point, and dropping to the lows of AU$0.39. 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 Seven West Media's current trading price of AU$0.41 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 Seven West Media’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
See our latest analysis for Seven West Media
What's The Opportunity In Seven West Media?
Good news, investors! Seven West Media is still a bargain right now according to my price multiple model, which compares 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 Seven West Media’s ratio of 3.14x is below its peer average of 13.95x, which indicates the stock is trading at a lower price compared to the Media industry. What’s more interesting is that, Seven West Media’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. 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 Seven West Media 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. 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. Though in the case of Seven West Media, it is expected to deliver a highly negative earnings growth in the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What This Means For You
Are you a shareholder? Although SWM is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to SWM, or whether diversifying into another stock may be a better move for your total risk and return.