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While JD Sports Fashion Plc (LON:JD.) might not have the largest market cap around , it saw significant share price movement during recent months on the LSE, rising to highs of UK£1.60 and falling to the lows of UK£0.93. 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 JD Sports Fashion's current trading price of UK£1.00 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at JD Sports Fashion’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 JD Sports Fashion
Is JD Sports Fashion Still Cheap?
The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio 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 JD Sports Fashion’s ratio of 15.15x is trading slightly above its industry peers’ ratio of 14.98x, which means if you buy JD Sports Fashion today, you’d be paying a relatively reasonable price for it. And if you believe JD Sports Fashion should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. Although, there may be an opportunity to buy in the future. This is because JD Sports Fashion’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What does the future of JD Sports Fashion 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. With profit expected to more than double over the next couple of years, the future seems bright for JD Sports Fashion. 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? JD.’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at JD.? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?