Is The Brighton Pier Group PLC (LON:PIER) Potentially Undervalued?

The Brighton Pier Group PLC (LON:PIER), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the AIM over the last few months, increasing to UK£0.64 at one point, and dropping to the lows of UK£0.42. 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 Brighton Pier Group's current trading price of UK£0.42 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 Brighton Pier Group’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 Brighton Pier Group

Is Brighton Pier Group Still Cheap?

According to my valuation model, Brighton Pier Group seems to be fairly priced at around 11% below my intrinsic value, which means if you buy Brighton Pier Group today, you’d be paying a fair price for it. And if you believe that the stock is really worth £0.48, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because Brighton Pier Group’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 Brighton Pier Group look like?

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 an extremely negative double-digit change in profit expected next year, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Brighton Pier Group, at least in the near future.

What This Means For You

Are you a shareholder? Currently, PIER appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on PIER for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on PIER should the price fluctuate below its true value.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example - Brighton Pier Group has 3 warning signs we think you should be aware of.

If you are no longer interested in Brighton Pier Group, 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.