Is Now The Time To Look At Buying Sportsman's Warehouse Holdings, Inc. (NASDAQ:SPWH)?

Sportsman's Warehouse Holdings, Inc. (NASDAQ:SPWH), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the NASDAQGS over the last few months. 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 Sportsman's Warehouse Holdings’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Sportsman's Warehouse Holdings

What's the opportunity in Sportsman's Warehouse Holdings?

Great news for investors – Sportsman's Warehouse Holdings is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. 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 10.49x is currently well-below the industry average of 17.98x, meaning that it is trading at a cheaper price relative to its peers. However, given that Sportsman's Warehouse 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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of Sportsman's Warehouse Holdings 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. 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. Though in the case of Sportsman's Warehouse Holdings, it is expected to deliver a highly negative earnings growth in the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What this means for you:

Are you a shareholder? Although SPWH is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to SPWH, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping an eye on SPWH for a while, but hesitant on making the leap, I recommend you research further into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, Sportsman's Warehouse Holdings has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.

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This article by Simply Wall St is general in nature. 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.
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