LeoVegas AB (publ) (STO:LEO), 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 kr37.39 and falling to the lows of kr29.93. 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 LeoVegas's current trading price of kr30.43 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 LeoVegas'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 LeoVegas
Is LeoVegas still cheap?
Great news for investors - LeoVegas is still trading at a fairly cheap price. 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 8.75x is currently well-below the industry average of 14.35x, meaning that it is trading at a cheaper price relative to its peers. Although, there may be another chance to buy again in the future. This is because LeoVegas's beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company's shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will LeoVegas generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it's the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. 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 LeoVegas. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? Although LEO is currently undervalued, 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 LEO, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you've been keeping tabs on LEO for some time, but hesitant on making the leap, I recommend you research further into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
Price is just the tip of the iceberg. Dig deeper into what truly matters - the fundamentals - before you make a decision on LeoVegas. You can find everything you need to know about LeoVegas in the latest infographic research report. If you are no longer interested in LeoVegas, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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