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SkyCity Entertainment Group Limited (NZSE:SKC), might not be a large cap stock, but it saw significant share price movement during recent months on the NZSE, rising to highs of NZ$2.96 and falling to the lows of NZ$2.63. 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 SkyCity Entertainment Group's current trading price of NZ$2.88 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 SkyCity Entertainment Group’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 SkyCity Entertainment Group
What Is SkyCity Entertainment Group Worth?
Great news for investors – SkyCity Entertainment Group is still trading at a fairly cheap price. My valuation model shows that the intrinsic value for the stock is NZ$4.74, 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, SkyCity Entertainment Group’s share price is theoretically 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.
What does the future of SkyCity Entertainment Group 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 revenues expected to grow by 96% over the next couple of years, the future seems bright for SkyCity Entertainment Group. If the level of expenses is able to be maintained, 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? Since SKC is currently undervalued, it may be a great time to increase your holdings in the stock. With an optimistic 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 capital structure to consider, which could explain the current undervaluation.