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Galaxy Entertainment Group Limited (HKG:27) led the SEHK gainers with a relatively large price hike in the past couple of weeks. As a large-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? Today I will analyse the most recent data on Galaxy Entertainment Group’s outlook and valuation to see if the opportunity still exists.
See our latest analysis for Galaxy Entertainment Group
What is Galaxy Entertainment Group worth?
The stock seems fairly valued at the moment according to my relative valuation model. 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 Galaxy Entertainment Group’s ratio of 18.07x is trading slightly above its industry peers’ ratio of 14.3x, which means if you buy Galaxy Entertainment Group today, you’d be paying a relatively fair price for it. And if you believe that Galaxy Entertainment Group should be trading at this level in the long run, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because Galaxy Entertainment Group’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.
Can we expect growth from Galaxy Entertainment Group?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. With profit expected to grow by 24% over the next couple of years, the future seems bright for Galaxy Entertainment Group. 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? 27’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. 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 27? Will you have enough confidence to invest in the company should the price drop below its fair value?