Zayo Group Holdings Inc (NYSE:ZAYO), a telecommunication services company based in United States, Check out our latest analysis for Zayo Group Holdings

What's the opportunity in ZAYO?

ZAYO is currently overpriced based on my relative valuation model. I’ve used the price-to-equity ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 98.4x is currently well-above the industry average of 28.6x, meaning that it is trading at a more expensive price relative to its peers. Furthermore, ZAYO’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

What kind of growth will ZAYO generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares.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 ZAYO future expectations. With profit expected to more than double over the next couple of years, the future seems bright for ZAYO. 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? It seems like the market has well and truly priced in ZAYO’s positive outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe ZAYO should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on ZAYO for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for ZAYO, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Zayo Group Holdings. You can find everything you need to know about ZAYO in the latest infographic research report. If you are no longer interested in Zayo Group Holdings, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.