When Should You Buy bet-at-home.com AG (ETR:ACX)?

bet-at-home.com AG (ETR:ACX), might not be a large cap stock, but it saw a significant share price rise of over 20% in the past couple of months on the XTRA. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s examine bet-at-home.com’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out the opportunities and risks within the DE Hospitality industry.

Is bet-at-home.com Still Cheap?

Great news for investors – bet-at-home.com 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 4.88x is currently well-below the industry average of 22.79x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, bet-at-home.com’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. 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 does the future of bet-at-home.com 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 extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for bet-at-home.com, at least in the near future.

What This Means For You

Are you a shareholder? Although ACX is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. I recommend you think about whether you want to increase your portfolio exposure to ACX, 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 ACX for a while, but hesitant on making the leap, I recommend you research further 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 while earnings quality is important, it's equally important to consider the risks facing bet-at-home.com at this point in time. Our analysis shows 3 warning signs for bet-at-home.com (2 don't sit too well with us!) and we strongly recommend you look at them before investing.

If you are no longer interested in bet-at-home.com, 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.