At NZ$10.32, Is It Time To Put Summerset Group Holdings Limited (NZSE:SUM) On Your Watch List?

Summerset Group Holdings Limited (NZSE:SUM), is not the largest company out there, but it saw significant share price movement during recent months on the NZSE, rising to highs of NZ$11.59 and falling to the lows of NZ$9.53. 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$10.32 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.

Check out our latest analysis for Summerset Group Holdings

What Is Summerset Group Holdings 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 5.77x is currently trading slightly below its industry peers’ ratio of 10.65x, which means if you buy Summerset Group Holdings today, you’d be paying a decent price for it. And if you believe that Summerset Group Holdings should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Furthermore, it seems like Summerset Group Holdings’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will Summerset Group Holdings generate?

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. Though in the case of Summerset Group Holdings, it is expected to deliver a highly negative earnings growth in the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? Currently, SUM appears to be trading around industry price multiples, 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 SUM, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on SUM for a while, now may not be the most advantageous time to buy, given it is trading around industry price multiples. This 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 SUM should the price fluctuate below the industry PE ratio.

If you'd like to know more about Summerset Group Holdings as a business, it's important to be aware of any risks it's facing. To that end, you should learn about the 5 warning signs we've spotted with Summerset Group Holdings (including 2 which are a bit unpleasant).

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.