Is There Now An Opportunity In Accel Entertainment, Inc. (NYSE:ACEL)?

While Accel Entertainment, Inc. (NYSE:ACEL) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$12.01 at one point, and dropping to the lows of US$10.22. 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 Accel Entertainment's current trading price of US$10.22 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 Accel Entertainment’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Accel Entertainment

What's The Opportunity In Accel Entertainment?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 15.9x is currently trading in-line with its industry peers’ ratio, which means if you buy Accel Entertainment today, you’d be paying a relatively sensible price for it. Although, there may be an opportunity to buy in the future. This is because Accel Entertainment’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.

What does the future of Accel Entertainment look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 negative profit growth of -6.2% expected next year, near-term growth certainly doesn’t appear to be a driver for a buy decision for Accel Entertainment. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? ACEL seems priced close to industry peers right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on ACEL, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on ACEL for a while, now may not be the most optimal time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystallize your views on ACEL should the price fluctuate below the industry PE ratio.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. In terms of investment risks, we've identified 2 warning signs with Accel Entertainment, and understanding these should be part of your investment process.

If you are no longer interested in Accel 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.