What Is Frasers Group plc's (LON:FRAS) Share Price Doing?

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 examine Frasers Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Frasers Group

What's the opportunity in Frasers Group?

Frasers Group appears to be overvalued by 40% at the moment, based on my discounted cash flow valuation. The stock is currently priced at UK£6.44 on the market compared to my intrinsic value of £4.61. This means that the opportunity to buy Frasers Group at a good price has disappeared! But, is there another opportunity to buy low in the future? Given that Frasers Group’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Frasers Group generate?

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. With revenues expected to grow by 30% over the next couple of years, the future seems bright for Frasers Group. 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? It seems like the market has well and truly priced in FRAS’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe FRAS 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 FRAS 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 FRAS, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

It can be quite valuable to consider what analysts expect for Frasers Group from their most recent forecasts. So feel free to check out our free graph representing analyst forecasts.

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.