At UK£70.68, Is NEXT plc (LON:NXT) Worth Looking At Closely?

NEXT plc (LON:NXT) saw a double-digit share price rise of over 10% in the past couple of months on the LSE. As a large-cap 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 NEXT’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for NEXT

Is NEXT Still Cheap?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 2.64% above my intrinsic value, which means if you buy NEXT today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth £68.86, then there isn’t really any room for the share price grow beyond what it’s currently trading. So, is there another chance to buy low in the future? Given that NEXT’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of NEXT look like?

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. However, with a negative profit growth of -1.6% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for NEXT. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? NXT 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 tabs on NXT for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The price seems 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 gel your views on NXT should the price fluctuate below its true value.

If you want to dive deeper into NEXT, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 2 warning signs for NEXT and you'll want to know about these.

If you are no longer interested in NEXT, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.