Southern Cross Media Group Limited (ASX:SXL), is not the largest company out there, but it received a lot of attention from a substantial price increase on the ASX over the last few months. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s examine Southern Cross Media Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What's the opportunity in Southern Cross Media Group?
Great news for investors – Southern Cross Media Group is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Southern Cross Media Group’s ratio of 11.81x is below its peer average of 21.06x, which indicates the stock is trading at a lower price compared to the Media industry. What’s more interesting is that, Southern Cross Media Group’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. 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 Southern Cross Media Group 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. 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 a double-digit 19% over the next couple of years, the outlook is positive for Southern Cross Media Group. 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? Since SXL is currently below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current price multiple.
Are you a potential investor? If you’ve been keeping an eye on SXL for a while, now might be the time to enter the stock. Its buoyant future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy SXL. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed assessment.
If you want to dive deeper into Southern Cross Media Group, you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 2 warning signs with Southern Cross Media Group, and understanding them should be part of your investment process.
If you are no longer interested in Southern Cross Media Group, 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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.