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Premium Brands Holdings Corporation (TSE:PBH), is not the largest company out there, but it received a lot of attention from a substantial price movement on the TSX over the last few months, increasing to CA$110 at one point, and dropping to the lows of CA$87.70. 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 Premium Brands Holdings' current trading price of CA$93.29 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Premium Brands Holdings’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 Premium Brands Holdings
What's the opportunity in Premium Brands Holdings?
Premium Brands Holdings appears to be expensive according to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 30.89x is currently well-above the industry average of 12.94x, meaning that it is trading at a more expensive price relative to its peers. Another thing to keep in mind is that Premium Brands Holdings’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards the levels of its industry peers over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard for it to fall back down into an attractive buying range again.
What kind of growth will Premium Brands Holdings 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. With profit expected to grow by 84% over the next year, the near-term future seems bright for Premium Brands Holdings. It looks like higher cash flow 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 PBH’s positive outlook, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe PBH should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.