Is It Time To Consider Buying Frasers Group Plc (LON:FRAS)?

While Frasers Group Plc (LON:FRAS) might not be the most widely known stock at the moment, it saw a decent share price growth in the teens level on the LSE over the last few months. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s take a look at Frasers Group’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Frasers Group

What Is Frasers Group Worth?

According to my valuation model, Frasers Group seems to be fairly priced at around 11% below my intrinsic value, which means if you buy Frasers Group today, you’d be paying a reasonable price for it. And if you believe the company’s true value is £9.69, 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 Frasers 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 Frasers Group 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. Though in the case of Frasers Group, it is expected to deliver a negative earnings growth of -3.9%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? FRAS seems fairly priced right now, 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 optimal 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 FRAS 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. Furthermore, 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 crystalize your views on FRAS should the price fluctuate below its true value.

If you want to dive deeper into Frasers Group, you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 2 warning signs with Frasers Group, and understanding these should be part of your investment process.

If you are no longer interested in Frasers 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.