Is National Vision Holdings, Inc. (NASDAQ:EYE) Potentially Undervalued?

National Vision Holdings, Inc. (NASDAQ:EYE), is not the largest company out there, but it led the NASDAQGS gainers with a relatively large price hike in the past couple of weeks. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s take a look at National Vision Holdings’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for National Vision Holdings

Is National Vision Holdings Still Cheap?

According to my valuation model, National Vision Holdings seems to be fairly priced at around 9.7% below my intrinsic value, which means if you buy National Vision Holdings today, you’d be paying a reasonable price for it. And if you believe the company’s true value is $36.87, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that National Vision Holdings’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will National Vision Holdings generate?

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. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for National Vision Holdings, at least in the near future.

What This Means For You

Are you a shareholder? Currently, EYE appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on EYE for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which 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 gel your views on EYE should the price fluctuate below its true value.

So while earnings quality is important, it's equally important to consider the risks facing National Vision Holdings at this point in time. In terms of investment risks, we've identified 1 warning sign with National Vision Holdings, and understanding it should be part of your investment process.

If you are no longer interested in National Vision Holdings, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.