Should You Investigate SEEK Limited (ASX:SEK) At AU$31.94?

SEEK Limited (ASX:SEK), is not the largest company out there, but it saw a decent share price growth in the teens level on the ASX over the last few months. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s take a look at SEEK’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for SEEK

What's the opportunity in SEEK?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 16.19% above my intrinsic value, which means if you buy SEEK today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth A$27.49, there’s only an insignificant downside when the price falls to its real value. Is there another opportunity to buy low in the future? Since SEEK’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 does the future of SEEK look like?

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. 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 an extreme expected decline in the top-line over the next couple of years, near-term growth is certainly not a driver of a buy decision. Even with a larger decline in expenses, it seems like high uncertainty is on the cards for SEEK.

What this means for you:

Are you a shareholder? SEK seems fairly priced right now, 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 the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on SEK for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on SEK should the price fluctuate below its true value.

So while earnings quality is important, it's equally important to consider the risks facing SEEK at this point in time. You'd be interested to know, that we found 1 warning sign for SEEK and you'll want to know about it.

If you are no longer interested in SEEK, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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