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Premier Investments Limited (ASX:PMV), which is in the specialty retail business, and is based in Australia, received a lot of attention from a substantial price movement on the ASX over the last few months, increasing to A$17.69 at one point, and dropping to the lows of A$15.08. 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 Premier Investments's current trading price of A$15.08 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 Premier Investments’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 Premier Investments
What's the opportunity in Premier Investments?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 16% below my intrinsic value, which means if you buy Premier Investments today, you’d be paying a fair price for it. And if you believe that the stock is really worth A$17.97, then there’s not much of an upside to gain from mispricing. In addition to this, Premier Investments has a low beta, which suggests its share price is less volatile than the wider market.
What kind of growth will Premier Investments generate?
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. 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. Premier Investments’s earnings over the next few years are expected to increase by 84%, 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? PMV’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping tabs on PMV, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.