Is Naked Wines plc (LON:WINE) Potentially Undervalued?

Naked Wines plc (LON:WINE), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the AIM over the last few months, increasing to UK£1.17 at one point, and dropping to the lows of UK£0.67. 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 Naked Wines' current trading price of UK£0.71 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 Naked Wines’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Naked Wines

Is Naked Wines Still Cheap?

Good news, investors! Naked Wines is still a bargain right now. My valuation model shows that the intrinsic value for the stock is £0.92, but it is currently trading at UK£0.71 on the share market, meaning that there is still an opportunity to buy now. What’s more interesting is that, Naked Wines’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 Naked Wines?

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 an expected decline of -11% in revenues over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Naked Wines. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Although WINE is currently undervalued, the adverse prospect of negative growth brings about some degree of risk. I recommend you think about whether you want to increase your portfolio exposure to WINE, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping an eye on WINE for a while, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Our analysis shows 3 warning signs for Naked Wines (2 shouldn't be ignored!) and we strongly recommend you look at them before investing.

If you are no longer interested in Naked Wines, 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.