WH Smith PLC (LON:SMWH), 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£17.09 at one point, and dropping to the lows of UK£13.38. 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 WH Smith's current trading price of UK£14.56 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at WH Smith’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
See our latest analysis for WH Smith
What's the opportunity in WH Smith?
Great news for investors – WH Smith is still trading at a fairly cheap price. According to my valuation, the intrinsic value for the stock is £23.79, 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 WH Smith’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 WH Smith 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. 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. In WH Smith's case, its revenues over the next few years are expected to grow by 59%, indicating a highly optimistic future ahead. If expense does not increase by the same rate, or higher, this top line growth should lead to stronger cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? Since SMWH is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. With an optimistic 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 SMWH for a while, now might be the time to make a leap. Its prosperous future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy SMWH. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed buy.
In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. In terms of investment risks, we've identified 1 warning sign with WH Smith, and understanding it should be part of your investment process.
If you are no longer interested in WH Smith, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
Valuation is complex, but we're here to simplify it.
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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.
About LSE:SMWH
WH Smith
Operates as a travel retailer in the United Kingdom, North America, Australia, Ireland, Spain, and internationally.
Reasonable growth potential second-rate dividend payer.
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