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While Viva Leisure Limited (ASX:VVA) might not have the largest market cap around , it received a lot of attention from a substantial price movement on the ASX over the last few months, increasing to AU$1.50 at one point, and dropping to the lows of AU$1.28. 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 Viva Leisure's current trading price of AU$1.37 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 Viva Leisure’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
View our latest analysis for Viva Leisure
What's The Opportunity In Viva Leisure?
Viva Leisure is currently expensive based on our price multiple model, where we look at the company's price-to-earnings ratio in comparison to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Viva Leisure’s ratio of 41.87x is above its peer average of 23.12x, which suggests the stock is trading at a higher price compared to the Hospitality industry. But, is there another opportunity to buy low in the future? Given that Viva Leisure’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 does the future of Viva Leisure look like?
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. Viva Leisure's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? It seems like the market has well and truly priced in VVA’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe VVA should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.