While J D Wetherspoon plc (LON:JDW) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the LSE over the last few months, increasing to UK£14.04 at one point, and dropping to the lows of UK£12.36. 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 J D Wetherspoon's current trading price of UK£13.17 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at J D Wetherspoon’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 J D Wetherspoon
What is J D Wetherspoon worth?
The stock is currently trading at UK£13.17 on the share market, which means it is overvalued by 39% compared to my intrinsic value of £9.51. This means that the opportunity to buy J D Wetherspoon at a good price has disappeared! If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since J D Wetherspoon’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 kind of growth will J D Wetherspoon generate?
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, J D Wetherspoon's earnings are expected to increase by 87%, 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? It seems like the market has well and truly priced in JDW’s positive outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe JDW 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 JDW 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 optimistic prospect is encouraging for JDW, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
If you want to dive deeper into J D Wetherspoon, you'd also look into what risks it is currently facing. Case in point: We've spotted 1 warning sign for J D Wetherspoon you should be aware of.
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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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About LSE:JDW
J D Wetherspoon
Owns and operates pubs and hotels in the United Kingdom and the Republic of Ireland.
Undervalued with limited growth.
