What Is SkyCity Entertainment Group Limited's (NZSE:SKC) Share Price Doing?

SkyCity Entertainment Group Limited (NZSE:SKC), 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$3.33 at one point, and dropping to the lows of NZ$2.78. 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 SkyCity Entertainment Group's current trading price of NZ$3.05 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 SkyCity Entertainment Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for SkyCity Entertainment Group

What's the opportunity in SkyCity Entertainment Group?

According to my valuation model, SkyCity Entertainment Group seems to be fairly priced at around 16% below my intrinsic value, which means if you buy SkyCity Entertainment Group today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth NZ$3.62, then there isn’t much room for the share price grow beyond what it’s currently trading. So, is there another chance to buy low in the future? Given that SkyCity Entertainment Group’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will SkyCity Entertainment Group 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. 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. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for SkyCity Entertainment Group, at least in the near future.

What this means for you:

Are you a shareholder? Currently, SKC appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on SKC for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on SKC should the price fluctuate below its true value.

If you want to dive deeper into SkyCity Entertainment Group, you'd also look into what risks it is currently facing. Our analysis shows 3 warning signs for SkyCity Entertainment Group (1 makes us a bit uncomfortable!) and we strongly recommend you look at these before investing.

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This article by Simply Wall St is general in nature. 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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