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While Salem Media Group, Inc. (NASDAQ:SALM) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the NASDAQGM over the last few months, increasing to US$3.47 at one point, and dropping to the lows of US$1.96. 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 Salem Media Group's current trading price of US$2.07 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 Salem Media Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
View our latest analysis for Salem Media Group
What's the opportunity in Salem Media Group?
Good news, investors! Salem Media Group is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Salem Media Group’s ratio of 1.31x is below its peer average of 12.97x, which indicates the stock is trading at a lower price compared to the Media industry. However, given that Salem Media 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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of Salem Media Group look like?
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. However, with an extremely negative double-digit change in profit expected next year, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Salem Media Group, at least in the near future.
What this means for you:
Are you a shareholder? Although SALM is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. I recommend you think about whether you want to increase your portfolio exposure to SALM, or whether diversifying into another stock may be a better move for your total risk and return.