Is Galaxy Entertainment Group (SEHK:27) Fairly Valued After Recent Share Price Gains?

Galaxy Entertainment Group (SEHK:27) has caught investors’ attention after its recent stock movement. While the company has seen a moderate shift over the month, its long-term track record remains mixed. This has prompted many to reassess its current valuation.

See our latest analysis for Galaxy Entertainment Group.

This year has seen Galaxy Entertainment Group's share price build momentum, up nearly 20% year-to-date, while its 1-year total shareholder return stands at 9.6%. Although the past month has been softer, with a 5.7% dip in the share price, the overall trajectory since January suggests renewed optimism about growth and profitability after a more challenging long-term run.

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With the stock showing solid gains in 2024 but lagging over longer periods, the key question emerges: Is Galaxy Entertainment Group currently trading below its true value, or is the market already confident about its future prospects?

Price-to-Earnings of 17.5x: Is it justified?

Galaxy Entertainment Group is currently trading at a price-to-earnings (P/E) ratio of 17.5x, compared to its last close price of HK$38.54. This valuation multiple is a direct measure of what the market is willing to pay today for each Hong Kong dollar of the company’s earnings and serves as a common yardstick in the Hospitality sector.

The P/E ratio helps investors gauge whether the stock price is high or low relative to its earnings. For Galaxy Entertainment Group, the market appears to be paying a slight premium for its earnings power, possibly due to its reputation or future prospects. The P/E of 17.5x is slightly above both the peer average (16.8x) and the industry average (16.9x). This suggests the market expects a better-than-average performance or sees lower risk in the business compared to local competitors.

However, relative to our fair P/E ratio estimate of 18.2x, the current multiple still suggests the stock is attractively valued. This level marks a point where the market could adjust if earnings momentum continues.

Explore the SWS fair ratio for Galaxy Entertainment Group

Result: Price-to-Earnings of 17.5x (ABOUT RIGHT)

However, uncertainties around industry competition and the potential for volatility in Macau’s gaming sector may present challenges to the sustainability of recent gains.

Find out about the key risks to this Galaxy Entertainment Group narrative.

Another View: What Does the SWS DCF Model Say?

While price-to-earnings suggests Galaxy Entertainment Group is about fairly valued, our DCF model offers a distinct perspective. According to this approach, the stock is trading roughly 14.7% below our estimate of its fair value. Could this mean there is hidden upside the market has missed?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Galaxy Entertainment Group for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 857 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Galaxy Entertainment Group Narrative

If our perspective doesn't fully match yours, or you want to investigate the numbers firsthand, you can quickly build a personal view in just a few minutes. Do it your way

A great starting point for your Galaxy Entertainment Group research is our analysis highlighting 4 key rewards and 1 important warning sign that could impact your investment decision.

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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.

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