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PPHE Hotel Group Limited (LON:PPH), is not the largest company out there, but it received a lot of attention from a substantial price movement on the LSE over the last few months, increasing to UK£14.30 at one point, and dropping to the lows of UK£12.15. 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 PPHE Hotel Group's current trading price of UK£12.15 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 PPHE Hotel Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is PPHE Hotel Group Still Cheap?
The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. 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 PPHE Hotel Group’s ratio of 18x is trading slightly above its industry peers’ ratio of 17.89x, which means if you buy PPHE Hotel Group today, you’d be paying a relatively reasonable price for it. And if you believe that PPHE Hotel Group should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. So, is there another chance to buy low in the future? Given that PPHE Hotel Group’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.
See our latest analysis for PPHE Hotel Group
Can we expect growth from PPHE Hotel Group?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. PPHE Hotel Group's earnings over the next few years are expected to increase by 93%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? It seems like the market has already priced in PPH’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 financial strength of the company. Have these factors changed since the last time you looked at PPH? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?