At NZ$10.19, Is It Time To Put Summerset Group Holdings Limited (NZSE:SUM) On Your Watch List?

Summerset Group Holdings Limited (NZSE:SUM), 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$12.25 at one point, and dropping to the lows of NZ$10.19. 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 Summerset Group Holdings' current trading price of NZ$10.19 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 Summerset Group Holdings’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 Summerset Group Holdings

Is Summerset Group Holdings still cheap?

Good news, investors! Summerset Group Holdings is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. 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 4.32x is currently well-below the industry average of 11.97x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, Summerset Group Holdings’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to move closer to its industry peers, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

What does the future of Summerset Group Holdings look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. 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 Summerset Group Holdings, at least in the near future.

What this means for you:

Are you a shareholder? Although SUM is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. I recommend you think about whether you want to increase your portfolio exposure to SUM, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping an eye on SUM for a while, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

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. Every company has risks, and we've spotted 2 warning signs for Summerset Group Holdings (of which 1 doesn't sit too well with us!) you should know about.

If you are no longer interested in Summerset Group Holdings, 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.