Is It Too Late To Consider Buying Playa Hotels & Resorts N.V. (NASDAQ:PLYA)?

While Playa Hotels & Resorts N.V. (NASDAQ:PLYA) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$8.23 and falling to the lows of US$6.91. 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 Playa Hotels & Resorts' current trading price of US$7.45 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 Playa Hotels & Resorts’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 Playa Hotels & Resorts

What Is Playa Hotels & Resorts 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. 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 27.36x is currently well-above the industry average of 19.99x, meaning that it is trading at a more expensive price relative to its peers. But, is there another opportunity to buy low in the future? Since Playa Hotels & Resorts’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. 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 Playa Hotels & Resorts?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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 87% over the next year, the near-term future seems bright for Playa Hotels & Resorts. 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 well and truly priced in PLYA’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe PLYA 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 tabs on PLYA for some time, 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 optimistic prospect is encouraging for PLYA, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about Playa Hotels & Resorts as a business, it's important to be aware of any risks it's facing. Our analysis shows 2 warning signs for Playa Hotels & Resorts (1 is a bit concerning!) and we strongly recommend you look at these before investing.

If you are no longer interested in Playa Hotels & Resorts, 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.