Is There Now An Opportunity In Baby Bunting Group Limited (ASX:BBN)?

By
Simply Wall St
Published
May 30, 2021
ASX:BBN
Source: Shutterstock

Baby Bunting Group Limited (ASX:BBN), 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 Baby Bunting Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Baby Bunting Group

What's the opportunity in Baby Bunting Group?

According to my valuation model, Baby Bunting Group seems to be fairly priced at around 5.5% below my intrinsic value, which means if you buy Baby Bunting Group today, you’d be paying a fair price for it. And if you believe that the stock is really worth A$6.51, then there’s not much of an upside to gain from mispricing. Furthermore, Baby Bunting Group’s low beta implies that the stock is less volatile than the wider market.

What kind of growth will Baby Bunting Group generate?

earnings-and-revenue-growth
ASX:BBN Earnings and Revenue Growth May 30th 2021

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. Baby Bunting Group's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has already priced in BBN’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on BBN, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

Since timing is quite important when it comes to individual stock picking, it's worth taking a look at what those latest analysts forecasts are. Luckily, you can check out what analysts are forecasting by clicking here.

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