When Should You Buy Super Retail Group Limited (ASX:SUL)?

Super Retail Group Limited (ASX:SUL), is not the largest company out there, but it saw a double-digit share price rise of over 10% in the past couple of months on the ASX. 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? Today I will analyse the most recent data on Super Retail Group’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Super Retail Group

What's The Opportunity In Super Retail Group?

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. 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 Super Retail Group’s ratio of 10.07x is trading slightly above its industry peers’ ratio of 9.28x, which means if you buy Super Retail Group today, you’d be paying a relatively reasonable price for it. And if you believe Super Retail Group should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. 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.

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. 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. However, with a negative profit growth of -17% 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 beneficial 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 tabs on SUL 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. 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 gel your views on SUL should the price fluctuate below the industry PE ratio.

If you'd like to know more about Super Retail Group as a business, it's important to be aware of any risks it's facing. For instance, we've identified 2 warning signs for Super Retail Group (1 is a bit concerning) you should be familiar with.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.