Let’s talk about the popular Liberty Broadband Corporation (NASDAQ:LBRD.K). The company’s shares received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$120 at one point, and dropping to the lows of US$73.45. 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 Liberty Broadband’s current trading price of US$80.64 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Liberty Broadband’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 Liberty Broadband
What’s The Opportunity In Liberty Broadband?
According to my price multiple model, which makes a comparison between the company’s price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 Liberty Broadband’s ratio of 8.16x is trading slightly below its industry peers’ ratio of 10.75x, which means if you buy Liberty Broadband today, you’d be paying a reasonable price for it. And if you believe Liberty Broadband should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. Is there another opportunity to buy low in the future? Since Liberty Broadband’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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.
What kind of growth will Liberty Broadband generate?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. However, with a negative profit growth of -9.7% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Liberty Broadband. This certainty tips the risk-return scale towards higher risk.
What This Means For You
Are you a shareholder? LBRD.K seems priced close to industry peers right now, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on LBRD.K, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on LBRD.K for a while, now may not be the most advantageous time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on LBRD.K should the price fluctuate below the industry PE ratio.
If you’d like to know more about Liberty Broadband as a business, it’s important to be aware of any risks it’s facing. You’d be interested to know, that we found 2 warning signs for Liberty Broadband and you’ll want to know about these.
If you are no longer interested in Liberty Broadband, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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Find out whether Liberty Broadband is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.
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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.
Read More: When Should You Buy Liberty Broadband Corporation (NASDAQ:LBRD.K)?