WH Smith PLC (LON:SMWH), might not be a large cap stock, but it saw a double-digit share price rise of over 10% in the past couple of months on the LSE. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s examine WH Smith’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What is WH Smith worth?
Great news for investors – WH Smith is still trading at a fairly cheap price. My valuation model shows that the intrinsic value for the stock is £22.04, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. What’s more interesting is that, WH Smith’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
Can we expect growth from WH Smith?
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. In WH Smith's case, its revenues over the next few years are expected to grow by 60%, indicating a highly optimistic future ahead. If expense does not increase by the same rate, or higher, this top line growth should lead to stronger cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? Since SMWH is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. With a positive 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 SMWH for a while, now might be the time to enter the stock. Its prosperous future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy SMWH. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed buy.
If you want to dive deeper into WH Smith, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 1 warning sign for WH Smith you should know about.
If you are no longer interested in WH Smith, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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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.