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Kathmandu Holdings Limited (NZSE:KMD), a specialty retail company based in New Zealand, saw significant share price volatility over the past couple of months on the NZSE, rising to the highs of NZ$2.6 and falling to the lows of NZ$2.3. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Kathmandu Holdings’s current trading price of NZ$2.31 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 Kathmandu Holdings’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 Kathmandu Holdings
What’s the opportunity in Kathmandu Holdings?
Great news for investors – Kathmandu Holdings is still trading at a fairly cheap price. My valuation model shows that the intrinsic value for the stock is NZ$4.12, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. What’s more interesting is that, Kathmandu Holdings’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to move to its intrinsic value, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
Can we expect growth from Kathmandu Holdings?
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. With profit expected to grow by a double-digit 17.52% over the next couple of years, the outlook is positive for Kathmandu Holdings. 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? Since KMD is currently undervalued, it may be a great time to increase your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on KMD for a while, now might be the time to enter the stock. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy KMD. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.