Should You Investigate Boston Pizza Royalties Income Fund (TSE:BPF.UN) At CA$15.30?
While Boston Pizza Royalties Income Fund (TSE:BPF.UN) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the TSX over the last few months, increasing to CA$16.73 at one point, and dropping to the lows of CA$14.58. 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 Boston Pizza Royalties Income Fund's current trading price of CA$15.30 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 Boston Pizza Royalties Income Fund’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 Boston Pizza Royalties Income Fund
Is Boston Pizza Royalties Income Fund Still Cheap?
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 Boston Pizza Royalties Income Fund’s ratio of 10.05x is trading slightly below its industry peers’ ratio of 14.5x, which means if you buy Boston Pizza Royalties Income Fund today, you’d be paying a decent price for it. And if you believe that Boston Pizza Royalties Income Fund should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. So, is there another chance to buy low in the future? Given that Boston Pizza Royalties Income Fund’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from Boston Pizza Royalties Income Fund?
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. 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. However, with a negative profit growth of -11% expected next year, near-term growth certainly doesn’t appear to be a driver for a buy decision for Boston Pizza Royalties Income Fund. This certainty tips the risk-return scale towards higher risk.
What This Means For You
Are you a shareholder? Currently, BPF.UN appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in 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 BPF.UN, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on BPF.UN 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. Furthermore, 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 BPF.UN should the price fluctuate below the industry PE ratio.
In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. To help with this, we've discovered 5 warning signs (1 can't be ignored!) that you ought to be aware of before buying any shares in Boston Pizza Royalties Income Fund.
If you are no longer interested in Boston Pizza Royalties Income Fund, 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.
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