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Restaurant Brands New Zealand Limited (NZSE:RBD), is not the largest company out there, but it saw a double-digit share price rise of over 10% in the past couple of months on the NZSE. While good news for shareholders, the company has traded much higher in the past year. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Today we will analyse the most recent data on Restaurant Brands New Zealand’s outlook and valuation to see if the opportunity still exists.
View our latest analysis for Restaurant Brands New Zealand
What Is Restaurant Brands New Zealand Worth?
According to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 Restaurant Brands New Zealand’s ratio of 23.01x is trading slightly above its industry peers’ ratio of 22.68x, which means if you buy Restaurant Brands New Zealand today, you’d be paying a relatively reasonable price for it. And if you believe Restaurant Brands New Zealand 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. In addition to this, it seems like Restaurant Brands New Zealand’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.
What does the future of Restaurant Brands New Zealand look like?
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 more than double over the next couple of years, the future seems bright for Restaurant Brands New Zealand. 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? It seems like the market has already priced in RBD’s positive outlook, with shares trading around industry price multiples. 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 RBD? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?