Should You Think About Buying Premier Investments Limited (ASX:PMV) Now?

Premier Investments Limited (ASX:PMV), might not be a large cap stock, but it saw significant share price movement during recent months on the ASX, rising to highs of AU$27.01 and falling to the lows of AU$20.01. 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 Premier Investments' current trading price of AU$20.01 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Premier Investments’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 Premier Investments

What's The Opportunity In Premier Investments?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. 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 10.77x is currently trading slightly above its industry peers’ ratio of 7.99x, which means if you buy Premier Investments today, you’d be paying a relatively reasonable price for it. And if you believe that Premier Investments should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Furthermore, Premier Investments’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

Can we expect growth from Premier Investments?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Though in the case of Premier Investments, it is expected to deliver a negative earnings growth of -11%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? PMV seems priced close to industry peers right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on PMV, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on PMV for a while, now may not be the most advantageous time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. Furthermore, 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 PMV should the price fluctuate below the industry PE ratio.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. You'd be interested to know, that we found 1 warning sign for Premier Investments and you'll want to know about this.

If you are no longer interested in Premier Investments, 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.