Today we're going to take a look at the well-established NEXT plc (LON:NXT). The company's stock saw significant share price movement during recent months on the LSE, rising to highs of UK£84.26 and falling to the lows of UK£59.76. 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 NEXT's current trading price of UK£59.76 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at NEXT’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is NEXT still cheap?
Great news for investors – NEXT is still trading at a fairly cheap price. My valuation model shows that the intrinsic value for the stock is £81.38, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. Although, there may be another chance to buy again in the future. This is because NEXT’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 kind of growth will NEXT 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. 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. With profit expected to grow by 20% over the next couple of years, the future seems bright for NEXT. 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 NXT is currently undervalued, it may be a great time to increase 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 capital structure to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on NXT for a while, now might be the time to make a leap. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy NXT. 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 NEXT 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 NEXT you should know about.
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.
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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.