Jumbo Interactive Limited (ASX:JIN), a AUDA$197.60M small-cap, is a consumer discretionary company operating in an industry, whose sales are driven primarily by consumer sentiment and access to capital. These macro factors tend to determine the rate at which consumers purchase leisure products. Consumer discretionary analysts are forecasting for the entire industry, a positive double-digit growth of 14.26% in the upcoming year , and a strong near-term growth of 16.46% over the next couple of years. However, this rate came in below the growth rate of the Australian stock market as a whole. Below, I will examine the sector growth prospects, and also determine whether Jumbo Interactive is a laggard or leader relative to its consumer discretionary sector peers. View our latest analysis for Jumbo Interactive

What’s the catalyst for Jumbo Interactive’s sector growth?

Rising competition for consumer attention from new activities such as online streaming and mobile games has forced traditional incumbents to adapt or fall behind. However, the leisure service industry as a whole has been expanding. In the previous year, the industry saw growth of 8.50%, beating the Australian market growth of 6.89%. Jumbo Interactive lags the pack with its lower growth rate of 1.81% over the past year, which indicates the company will be growing at a slower pace than its leisure peers. However, the future seems brighter, as analysts expect an industry-beating growth rate of 18.35% in the upcoming year.

Is Jumbo Interactive and the sector relatively cheap?

The leisure sector’s PE is currently hovering around 25x, above the broader Australian stock market PE of 18x. This means the industry, on average, is relatively overvalued compared to the wider market. However, the industry returned a lower 9.65% compared to the market’s 11.86%, which may be indicative of past headwinds. On the stock-level, Jumbo Interactive is trading at a PE ratio of 23x, which is relatively in-line with the average leisure stock. In terms of returns, Jumbo Interactive generated 22.48% in the past year, which is 12.82% over the leisure sector.

What this means for you:

Are you a shareholder? Jumbo Interactive’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. However, this high growth prospect is most likely factored into the share price, given Jumbo Interactive is trading in-line with its peers. If you’re bullish on the stock and well-diversified by industry, you may decide to hold onto Jumbo Interactive as part of your portfolio. However, if you’re relatively concentrated in leisure, you may want to value Jumbo Interactive based on its cash flows to determine if it is overpriced based on its current growth outlook.

Are you a potential investor? If Jumbo Interactive has been on your watchlist for a while, now may be the time to enter into the stock. If you like its growth prospects, you’ll be paying a fair value for the company, given that it is trading relatively in-line with its peers. However, if you’re hoping to gain from an undervalued mispricing, this is probably not the best time.

For a deeper dive into Jumbo Interactive’s stock, take a look at the company’s latest free analysis report to find out more on its financial health and other fundamentals. Interested in other consumer discretionary stocks instead? Use our free playform to see my list of over 100 other consumer discretionary companies trading on the market.

To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.