J D Wetherspoon plc (LON:JDW), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the LSE over the last few months, increasing to UK£9.26 at one point, and dropping to the lows of UK£7.00. 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£7.00 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 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.
Is J D Wetherspoon still cheap?
Good news, investors! J D Wetherspoon is still a bargain right now. According to my valuation, the intrinsic value for the stock is £11.39, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. What’s more interesting is that, J D Wetherspoon’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 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. 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 revenues expected to grow by 74% over the next couple of years, the future seems bright for J D Wetherspoon. If the level of expenses is able to be maintained, 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? Since JDW is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on JDW for a while, now might be the time to enter the stock. Its prosperous future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy JDW. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed buy.
If you'd like to know more about J D Wetherspoon as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 2 warning signs for J D Wetherspoon (of which 1 can't be ignored!) you should know about.
If you are no longer interested in J D Wetherspoon, 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.