Graham Holdings Company (NYSE:GHC), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the NYSE over the last few months. The company is now trading at yearly-high levels following the recent surge in its share price. As a US$4.0b market-cap stock, it seems odd Graham Holdings is not more well-covered by analysts. Although, there is more of an opportunity for mispricing in stocks with low coverage, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Today we will analyse the most recent data on Graham Holdings's outlook and valuation to see if the opportunity still exists.
Is Graham Holdings Still Cheap?
Great news for investors – Graham Holdings is still trading at a fairly cheap price. Our valuation model shows that the intrinsic value for the stock is $1214.77, but it is currently trading at US$931 on the share market, meaning that there is still an opportunity to buy now. However, given that Graham 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 Graham Holdings 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 a double-digit 10% over the next couple of years, the outlook is positive for Graham Holdings. 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 GHC is currently undervalued, it may be a great time to accumulate more of 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 financial health to consider, which could explain the current undervaluation.
Are you a potential investor? If you've been keeping an eye on GHC for a while, now might be the time to enter the stock. Its buoyant future outlook isn't fully reflected in the current share price yet, which means it's not too late to buy GHC. 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.
With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. When we did our research, we found 3 warning signs for Graham Holdings (1 is a bit concerning!) that we believe deserve your full attention.
If you are no longer interested in Graham Holdings, 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.
