Why Sleep Country Canada Holdings Inc. (TSE:ZZZ) Could Be Worth Watching

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$29.56 and falling to the lows of CA$20.60. 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$20.60 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.

View our latest analysis for Sleep Country Canada Holdings

What Is Sleep Country Canada Holdings 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. 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 Sleep Country Canada Holdings’s ratio of 7.07x is trading slightly below its industry peers’ ratio of 7.27x, which means if you buy Sleep Country Canada Holdings today, you’d be paying a reasonable price for it. And if you believe that Sleep Country Canada Holdings 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 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.

Can we expect growth from Sleep Country Canada Holdings?

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. 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. Though in the case of Sleep Country Canada Holdings, it is expected to deliver a relatively unexciting earnings growth of 6.5%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for Sleep Country Canada Holdings, at least in the near term.

What This Means For You

Are you a shareholder? It seems like the market has already priced in ZZZ’s growth outlook, with shares trading around industry price multiples. 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 ZZZ? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

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 industry price multiples. However, the positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about Sleep Country Canada Holdings as a business, it's important to be aware of any risks it's facing. While conducting our analysis, we found that Sleep Country Canada Holdings has 1 warning sign and it would be unwise to ignore it.

If you are no longer interested in Sleep Country Canada Holdings, 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.