Playa Hotels & Resorts NV (NASDAQ:PLYA), isn’t the biggest company in the market, but it has seen significant price moves in recent months on the NASDAQGS, hitting highs of $9.38 and falling to lows of $6.35. Certain movements in the stock price can give investors a better opportunity to get into the stock and potentially buy at a lower price. One question to answer is does Playa Hotels & Resorts current price of $6.72 reflect the true value of the small cap? Or is it currently undervalued, giving us the opportunity to buy? Let’s take a look at the outlook and value of Playa Hotels & Resorts based on the most recent financial data to see if there are any catalysts for a price change.
See our latest review for Playa Hotels & Resorts
What is the opportunity at Playa Hotels & Resorts?
According to my multiple price model, which compares the company’s price-earnings ratio to the industry average, the stock price seems justified. In this case, I used the Price/Earnings (PE) ratio since there is not enough information to reliably predict the stock’s cash flow. I find that Playa Hotels & Resorts’ ratio of 18.26x trades in line with the ratio of its industry peers, which means that if you buy Playa Hotels & Resorts today, you would pay a relatively within reason. So, is there another chance to buy low in the future? Since Playa Hotels & Resorts’ share is quite volatile (i.e. its price movements are amplified relative to the rest of the market), this could mean that the price may drop, giving us the opportunity to buy later. This is based on its high beta, which is a good indicator of stock price volatility.
What type of growth will Playa Hotels & Resorts generate?
Investors looking for portfolio growth may want to consider a company’s prospects before buying its stock. Although value investors argue that it is intrinsic value relative to price that matters most, a more compelling investment thesis would be high growth potential at a cheap price. With profits expected to rise 59% over the next year, the short-term future looks bright for Playa Hotels & Resorts. It seems that a higher cash flow is expected for the stock, which should translate into a higher valuation of the stock.
What this means for you
Are you a shareholder? PLYA’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors that we have not considered today, such as the financial strength of the company. Have these factors changed since the last time you reviewed PLYA? Will you have enough conviction to buy if the price moves below the industry PE ratio?
Are you a potential investor? If you’ve been keeping an eye on PLYA, now might not be the most optimal time to buy, given that it’s trading around industry price multiples. However, the positive outlook is encouraging for PLYA, which means that it is worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
If you want to learn more about Playa Hotels & Resorts as a business, it is important to be aware of the risks it faces. At Simply Wall St, we found 1 warning sign for Playa Hotels & Resorts and we think they deserve your attention.
If you are no longer interested in Playa Hotels & Resorts, you can use our free platform to view our list of over 50 other stocks with high growth potential.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.
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