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While J D Wetherspoon plc (LON:JDW) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the LSE over the last few months, increasing to UK£9.73 at one point, and dropping to the lows of UK£7.29. 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 J D Wetherspoon's current trading price of UK£7.37 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 J D Wetherspoon’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 J D Wetherspoon
What's the opportunity in J D Wetherspoon?
Good news, investors! J D Wetherspoon is still a bargain right now. My valuation model shows that the intrinsic value for the stock is £11.13, but it is currently trading at UK£7.37 on the share market, meaning that there is still an opportunity to buy now. Although, there may be another chance to buy again in the future. This is because J D Wetherspoon’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 J D Wetherspoon 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 revenues expected to grow by 73% over the next couple of years, the future seems bright for J D Wetherspoon. If the level of expenses is able to be maintained, 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? Since JDW is currently undervalued, it may be a great time to increase your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on JDW for a while, now might be the time to make a leap. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy JDW. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.