While Naked Wines plc (LON:WINE) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the AIM over the last few months, increasing to UK£8.79 at one point, and dropping to the lows of UK£6.53. 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 Naked Wines' current trading price of UK£6.66 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 Naked Wines’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What's the opportunity in Naked Wines?
According to my valuation model, Naked Wines seems to be fairly priced at around 3.23% above my intrinsic value, which means if you buy Naked Wines today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is £6.45, then there isn’t really any room for the share price grow beyond what it’s currently trading. In addition to this, Naked Wines has a low beta, which suggests its share price is less volatile than the wider market.
What does the future of Naked Wines look like?
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. With profit expected to grow by 75% over the next couple of years, the future seems bright for Naked Wines. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? It seems like the market has already priced in WINE’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping an eye on WINE, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, 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. In terms of investment risks, we've identified 1 warning sign with Naked Wines, and understanding it should be part of your investment process.
If you are no longer interested in Naked Wines, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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.
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