Is Now The Time To Look At Buying SKY Network Television Limited (NZSE:SKT)?

While SKY Network Television Limited (NZSE:SKT) might not be the most widely known stock at the moment, it saw a significant share price rise of over 20% in the past couple of months on the NZSE. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Today I will analyse the most recent data on SKY Network Television’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for SKY Network Television

What is SKY Network Television worth?

According to my valuation model, SKY Network Television seems to be fairly priced at around 6.2% below my intrinsic value, which means if you buy SKY Network Television today, you’d be paying a reasonable price for it. And if you believe the company’s true value is NZ$0.19, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that SKY Network Television’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 does the future of SKY Network Television 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. Though in the case of SKY Network Television, it is expected to deliver a negative revenue growth of -8.2% over the next couple of 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, SKT 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 de-risk 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 SKT for a while, now may not be the most optimal 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 crystalize your views on SKT should the price fluctuate below its true value.

So while earnings quality is important, it's equally important to consider the risks facing SKY Network Television at this point in time. At Simply Wall St, we found 1 warning sign for SKY Network Television and we think they deserve your attention.

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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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