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

Playa Hotels & Resorts N.V. (NASDAQ:PLYA), might not be a large cap stock, but it saw a significant share price rise of 26% in the past couple of months on the NASDAQGS. The recent share price gains has brought the company back closer to its yearly peak. 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 we 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

Is Playa Hotels & Resorts Still Cheap?

The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Playa Hotels & Resorts’s ratio of 23.49x is trading slightly above its industry peers’ ratio of 19.84x, which means if you buy Playa Hotels & Resorts today, you’d be paying a relatively sensible price for it. And if you believe that Playa Hotels & Resorts should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Although, there may be an opportunity to buy in the future. This is because Playa Hotels & Resorts’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with a relatively muted profit growth of 4.3% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Playa Hotels & Resorts, at least in the short term.

What This Means For You

Are you a shareholder? PLYA’s future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at PLYA? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on PLYA, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Be aware that Playa Hotels & Resorts is showing 2 warning signs in our investment analysis and 1 of those is significant...

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.