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Let's talk about the popular NEXT plc (LON:NXT). The company's shares received a lot of attention from a substantial price movement on the LSE over the last few months, increasing to UK£105 at one point, and dropping to the lows of UK£93.76. 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 NEXT's current trading price of UK£102 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at NEXT’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 NEXT
Is NEXT Still Cheap?
According to our valuation model, NEXT seems to be fairly priced at around 7.5% below our intrinsic value, which means if you buy NEXT today, you’d be paying a fair price for it. And if you believe the company’s true value is £110.64, then there isn’t much room for the share price grow beyond what it’s currently trading. So, is there another chance to buy low in the future? Given that NEXT’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will NEXT generate?
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. 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. However, with a relatively muted profit growth of 7.8% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for NEXT, at least in the short term.
What This Means For You
Are you a shareholder? NXT’s future growth appears to have been factored into the current share price, 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 the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping tabs on NXT, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.