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Scandic Hotels Group AB (publ) (STO:SHOT), which is in the hospitality business, and is based in Sweden, saw significant share price movement during recent months on the OM, rising to highs of SEK92.25 and falling to the lows of SEK75.3. 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 Scandic Hotels Group's current trading price of SEK81.85 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 Scandic Hotels Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Check out our latest analysis for Scandic Hotels Group
Is Scandic Hotels Group still cheap?
The stock seems fairly valued at the moment according to my relative valuation model. 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 9.88x is currently trading slightly below its industry peers’ ratio of 13.53x, which means if you buy Scandic Hotels Group today, you’d be paying a fair price for it. And if you believe that Scandic Hotels Group should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. Is there another opportunity to buy low in the future? Since Scandic Hotels Group’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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.
What kind of growth will Scandic Hotels Group 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. However, with a negative profit growth of -19% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Scandic Hotels Group. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? Currently, SHOT appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on SHOT, take a look at whether its fundamentals have changed.