At US$19.56, Is Topgolf Callaway Brands Corp. (NYSE:MODG) Worth Looking At Closely?

Topgolf Callaway Brands Corp. (NYSE:MODG), is not the largest company out there, but it saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on Topgolf Callaway Brands’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Topgolf Callaway Brands

What Is Topgolf Callaway Brands Worth?

According to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Topgolf Callaway Brands’s ratio of 37.74x is above its peer average of 13.39x, which suggests the stock is trading at a higher price compared to the Leisure industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Topgolf Callaway Brands’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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of Topgolf Callaway Brands 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 more than double over the next couple of years, the future seems bright for Topgolf Callaway Brands. 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? MODG’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe MODG should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on MODG for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for MODG, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into Topgolf Callaway Brands, you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 1 warning sign with Topgolf Callaway Brands, and understanding it should be part of your investment process.

If you are no longer interested in Topgolf Callaway Brands, 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.