Stock Analysis

Is Now The Time To Look At Buying Sleep Country Canada Holdings Inc. (TSE:ZZZ)?

TSX:ZZZ
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While Sleep Country Canada Holdings Inc. (TSE:ZZZ) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the TSX, rising to highs of CA$35.40 and falling to the lows of CA$27.28. 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 Sleep Country Canada Holdings' current trading price of CA$27.28 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 Sleep Country Canada Holdings’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 Sleep Country Canada Holdings

Is Sleep Country Canada Holdings still cheap?

According to my valuation model, Sleep Country Canada Holdings seems to be fairly priced at around 19% below my intrinsic value, which means if you buy Sleep Country Canada Holdings today, you’d be paying a fair price for it. And if you believe the company’s true value is CA$33.86, then there isn’t much room for the share price grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since Sleep Country Canada Holdings’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 kind of growth will Sleep Country Canada Holdings generate?

earnings-and-revenue-growth
TSX:ZZZ Earnings and Revenue Growth July 19th 2021

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. In the upcoming year, Sleep Country Canada Holdings' earnings are expected to increase by 24%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? ZZZ’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping an eye on ZZZ, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example - Sleep Country Canada Holdings has 2 warning signs we think you should be aware of.

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Valuation is complex, but we're helping make it simple.

Find out whether Sleep Country Canada Holdings is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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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