Should You Think About Buying Super Retail Group Limited (ASX:SUL) Now?

While Super Retail Group Limited (ASX:SUL) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase 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, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on Super Retail Group’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Super Retail Group

Is Super Retail Group still cheap?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 11.89% above my intrinsic value, which means if you buy Super Retail Group today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is A$11.92, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because Super Retail Group’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

Can we expect growth from Super Retail Group?

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. However, with a negative profit growth of -12% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Super Retail Group. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? SUL 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 optimal 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 SUL for a while, now may not be the most optimal 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 crystalize your views on SUL should the price fluctuate below its true value.

If you want to dive deeper into Super Retail Group, you'd also look into what risks it is currently facing. For instance, we've identified 3 warning signs for Super Retail Group (1 is potentially serious) you should be familiar with.

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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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