Ardent Leisure Group (ASX:AAD), a hospitality company based in Australia, saw a decent share price growth in the teens level on the ASX over the last few months. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Ardent Leisure Group’s outlook and value based on the most recent financial data to see if the opportunity still exists. See our latest analysis for Ardent Leisure Group
Is Ardent Leisure Group still cheap?
According to my relative valuation model, the stock seems to be currently fairly priced. In this instance, I’ve used the price-to-book (PB) ratio given that there is not enough information to reliably forecast the stock’s cash flows, and its earnings doesn’t seem to reflect its true value. I find that Ardent Leisure Group’s ratio of 1.74x is trading slightly below its industry peers’ ratio of 2.18x, which means if you buy Ardent Leisure Group today, you’d be paying a relatively reasonable price for it. And if you believe that Ardent Leisure Group should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. Furthermore, it seems like Ardent Leisure Group’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.
Can we expect growth from Ardent Leisure Group?
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 revenues expected to grow by 44.48% over the next couple of years, the future seems bright for Ardent Leisure Group. If the level of expenses is able to be maintained, it looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? It seems like the market has already priced in Ardent Leisure Group’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at Ardent Leisure Group? Will you have enough confidence to invest in the company should the price drop below its fair value?