Should You Investigate Restaurant Brands New Zealand Limited (NZSE:RBD) At NZ$9.61?

Restaurant Brands New Zealand Limited (NZSE:RBD), is not the largest company out there, but it received a lot of attention from a substantial price movement on the NZSE over the last few months, increasing to NZ$13.29 at one point, and dropping to the lows of NZ$9.61. 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$9.61 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.

View our latest analysis for Restaurant Brands New Zealand

What Is Restaurant Brands New Zealand Worth?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 23.11x is currently trading slightly below its industry peers’ ratio of 26.74x, which means if you buy Restaurant Brands New Zealand today, you’d be paying a decent price for it. And if you believe Restaurant Brands New Zealand should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. In addition to this, it seems like Restaurant Brands New Zealand’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.

What does the future of Restaurant Brands New Zealand look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. With profit expected to grow by 36% over the next couple of years, the future seems bright for Restaurant Brands New Zealand. 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? It seems like the market has already priced in RBD’s positive outlook, with shares trading around industry price multiples. 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 RBD? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

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 industry price multiples. However, the positive outlook is encouraging for RBD, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

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. For instance, we've identified 3 warning signs for Restaurant Brands New Zealand (1 is a bit unpleasant) you should be familiar with.

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.

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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.