When Should You Buy Yellow Pages Limited (TSE:Y)?

While Yellow Pages Limited (TSE:Y) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the TSX over the last few months, increasing to CA$12.85 at one point, and dropping to the lows of CA$11.59. 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 Yellow Pages' current trading price of CA$11.96 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Yellow Pages’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 Yellow Pages

What's the opportunity in Yellow Pages?

Good news, investors! Yellow Pages is still a bargain right now. My valuation model shows that the intrinsic value for the stock is CA$18.50, but it is currently trading at CA$11.96 on the share market, meaning that there is still an opportunity to buy now. Although, there may be another chance to buy again in the future. This is because Yellow Pages’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.

What does the future of Yellow Pages look like?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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 an extreme expected decline in the top-line over the next couple of years, near-term growth is certainly not a driver of a buy decision. Even with a larger decline in expenses, it seems like high uncertainty is on the cards for Yellow Pages.

What this means for you:

Are you a shareholder? Although Y is currently undervalued, the negative outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to Y, 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 an eye on Y for a while, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example - Yellow Pages has 2 warning signs we think you should be aware of.

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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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