Stock Analysis

Should You Investigate Dave & Buster's Entertainment, Inc. (NASDAQ:PLAY) At US$40.97?

NasdaqGS:PLAY
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Dave & Buster's Entertainment, Inc. (NASDAQ:PLAY), might not be a large cap stock, but it led the NASDAQGS gainers with a relatively large price hike in the past couple of weeks. With many analysts covering the 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? Let’s take a look at Dave & Buster's Entertainment’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Dave & Buster's Entertainment

What's The Opportunity In Dave & Buster's Entertainment?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 6.3% below my intrinsic value, which means if you buy Dave & Buster's Entertainment today, you’d be paying a reasonable price for it. And if you believe the company’s true value is $43.72, then there isn’t much room for the share price grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since Dave & Buster's Entertainment’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from Dave & Buster's Entertainment?

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NasdaqGS:PLAY Earnings and Revenue Growth January 20th 2023

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 grow by 48% over the next couple of years, the future seems bright for Dave & Buster's Entertainment. 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? It seems like the market has already priced in PLAY’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on PLAY, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Dave & Buster's Entertainment at this point in time. In terms of investment risks, we've identified 1 warning sign with Dave & Buster's Entertainment, and understanding it should be part of your investment process.

If you are no longer interested in Dave & Buster's Entertainment, 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.