Is Playa Hotels & Resorts N.V. (NASDAQ:PLYA) Potentially Undervalued?

By
Simply Wall St
Published
April 17, 2022
NasdaqGS:PLYA
Source: Shutterstock

While Playa Hotels & Resorts N.V. (NASDAQ:PLYA) might not be the most widely known stock at the moment, it saw a double-digit share price rise of over 10% in the past couple of months on the NASDAQGS. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Today I will analyse the most recent data on Playa Hotels & Resorts’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Playa Hotels & Resorts

What is Playa Hotels & Resorts worth?

Great news for investors – Playa Hotels & Resorts is still trading at a fairly cheap price. According to my valuation, the intrinsic value for the stock is $11.54, but it is currently trading at US$8.34 on the share market, meaning that there is still an opportunity to buy now. What’s more interesting is that, Playa Hotels & Resorts’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. 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.

What does the future of Playa Hotels & Resorts look like?

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NasdaqGS:PLYA Earnings and Revenue Growth April 17th 2022

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. In Playa Hotels & Resorts' case, its revenues over the next few years are expected to grow by 67%, indicating a highly optimistic future ahead. If expense does not increase by the same rate, or higher, this top line growth should lead to stronger cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? Since PLYA is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on PLYA for a while, now might be the time to make a leap. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy PLYA. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.

So while earnings quality is important, it's equally important to consider the risks facing Playa Hotels & Resorts at this point in time. Case in point: We've spotted 1 warning sign for Playa Hotels & Resorts you should be aware of.

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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