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Today we're going to take a look at the well-established Best Buy Co., Inc. (NYSE:BBY). The company's stock led the NYSE gainers with a relatively large price hike in the past couple of weeks. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Today I will analyse the most recent data on Best Buy’s outlook and valuation to see if the opportunity still exists.
See our latest analysis for Best Buy
Is Best Buy Still Cheap?
Great news for investors – Best Buy is still trading at a fairly cheap price. My valuation model shows that the intrinsic value for the stock is $117.29, 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, Best Buy’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
Can we expect growth from Best Buy?
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 the company's future expectations. Best Buy's earnings over the next few years are expected to increase by 22%, 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? Since BBY 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 financial health to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on BBY for a while, now might be the time to enter the stock. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy BBY. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed buy.
So while earnings quality is important, it's equally important to consider the risks facing Best Buy at this point in time. In terms of investment risks, we've identified 2 warning signs with Best Buy, and understanding them should be part of your investment process.