Restaurant Brands New Zealand Limited (NZSE:RBD), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the NZSE over the last few months, increasing to NZ$15.83 at one point, and dropping to the lows of NZ$13.80. 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 Restaurant Brands New Zealand's current trading price of NZ$13.80 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Restaurant Brands New Zealand’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What's the opportunity in Restaurant Brands New Zealand?
According to my valuation model, Restaurant Brands New Zealand seems to be fairly priced at around 3.3% below my intrinsic value, which means if you buy Restaurant Brands New Zealand today, you’d be paying a fair price for it. And if you believe that the stock is really worth NZ$14.27, then there’s not much of an upside to gain from mispricing. Furthermore, Restaurant Brands New Zealand’s low beta implies that the stock is less volatile than the wider market.
What does the future of Restaurant Brands New Zealand 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. 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. Restaurant Brands New Zealand's earnings over the next few years are expected to increase by 44%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? RBD’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping tabs on RBD, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. In terms of investment risks, we've identified 1 warning sign with Restaurant Brands New Zealand, and understanding it should be part of your investment process.
If you are no longer interested in Restaurant Brands New Zealand, 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 helping make it simple.
Find out whether Restaurant Brands New Zealand is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.View the Free Analysis
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.
Restaurant Brands New Zealand
Restaurant Brands New Zealand Limited, together with its subsidiaries, operates quick service and takeaway restaurants in New Zealand, Australia, California, Hawaii, Saipan, and Guam.
Reasonable growth potential and fair value.