What Is Academy Sports and Outdoors, Inc.'s (NASDAQ:ASO) Share Price Doing?

Academy Sports and Outdoors, Inc. (NASDAQ:ASO), might not be a large cap stock, but it saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$59.79 and falling to the lows of US$45.61. 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 Academy Sports and Outdoors' current trading price of US$47.27 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Academy Sports and Outdoors’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 Academy Sports and Outdoors

What's The Opportunity In Academy Sports and Outdoors?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Academy Sports and Outdoors’s ratio of 6.52x is trading slightly below its industry peers’ ratio of 11.34x, which means if you buy Academy Sports and Outdoors today, you’d be paying a reasonable price for it. And if you believe that Academy Sports and Outdoors should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Although, there may be an opportunity to buy in the future. This is because Academy Sports and Outdoors’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 Academy Sports and Outdoors look like?

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. Academy Sports and Outdoors' earnings over the next few years are expected to increase by 26%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? ASO’s optimistic 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 ASO? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on ASO, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for ASO, which means it’s worth further examining other factors such as the strength of its balance sheet, 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. Every company has risks, and we've spotted 1 warning sign for Academy Sports and Outdoors you should know about.

If you are no longer interested in Academy Sports and Outdoors, 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.