Is Telenet Group Holding NV (EBR:TNET) Potentially Undervalued?

While Telenet Group Holding NV (EBR:TNET) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the ENXTBR over the last few months, increasing to €31.96 at one point, and dropping to the lows of €24.68. 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 Telenet Group Holding's current trading price of €25.72 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 Telenet Group Holding’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Telenet Group Holding

What is Telenet Group Holding worth?

Great news for investors – Telenet Group Holding is still trading at a fairly cheap price 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 6.35x is currently well-below the industry average of 14.91x, meaning that it is trading at a cheaper price relative to its peers. Another thing to keep in mind is that Telenet Group Holding’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its industry peers, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.

What kind of growth will Telenet Group Holding generate?

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 -19% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Telenet Group Holding. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? Although TNET is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to TNET, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping tabs on TNET for some time, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. To that end, you should learn about the 4 warning signs we've spotted with Telenet Group Holding (including 3 which are significant).

If you are no longer interested in Telenet Group Holding, 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.