Why Hollywood Bowl Group plc (LON:BOWL) Could Be Worth Watching

Hollywood Bowl Group plc (LON:BOWL), is not the largest company out there, but it led the LSE gainers with a relatively large price hike in the past couple of weeks. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Let’s examine Hollywood Bowl Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Hollywood Bowl Group

Is Hollywood Bowl Group still cheap?

Hollywood Bowl Group appears to be overvalued by 26% at the moment, based on my discounted cash flow valuation. The stock is currently priced at UK£2.33 on the market compared to my intrinsic value of £1.85. Not the best news for investors looking to buy! But, is there another opportunity to buy low in the future? Since Hollywood Bowl Group’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. 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 Hollywood Bowl 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. With profit expected to more than double over the next couple of years, the future seems bright for Hollywood Bowl Group. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? BOWL’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe BOWL should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on BOWL for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for BOWL, which means it’s worth diving deeper into other factors 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 - Hollywood Bowl Group has 3 warning signs we think you should be aware of.

If you are no longer interested in Hollywood Bowl 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. 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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