What Is Super Retail Group Limited's (ASX:SUL) Share Price Doing?

While Super Retail Group Limited (ASX:SUL) might not be the most widely known stock at the moment, it saw a decent share price growth in the teens level 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, what if the stock is still a bargain? Let’s take a look at Super Retail Group’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Super Retail Group

What Is Super Retail Group Worth?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 8.86x is currently trading slightly below its industry peers’ ratio of 9.59x, which means if you buy Super Retail Group today, you’d be paying a reasonable price for it. And if you believe that Super Retail Group should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Is there another opportunity to buy low in the future? Since Super Retail Group’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 Super Retail Group look like?

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 -13% 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 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 SUL, 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 industry price multiples. This 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 crystallize your views on SUL should the price fluctuate below the industry PE ratio.

So while earnings quality is important, it's equally important to consider the risks facing Super Retail Group at this point in time. To that end, you should learn about the 2 warning signs we've spotted with Super Retail Group (including 1 which shouldn't be ignored).

If you are no longer interested in Super Retail 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.