Why World Wrestling Entertainment, Inc. (NYSE:WWE) Might Be Worth Watching

World Wrestling Entertainment, Inc. (NYSE:WWE) may not be a large-cap stock, but it has posted a double-digit gain of over 10% over the past few months on the NYSE. As a mid-cap stock with high analyst coverage, one might assume that any recent changes in the company’s outlook are already priced into the stock. But what if the stock is still a steal? Today I’m going to analyze the latest data on World Wrestling Entertainment’s prospects and ratings to see if the opportunity is still there.

Try this chances and risks within the US entertainment industry.

Is World Wrestling Entertainment Still Cheap?

Based on my price multiple model, which compares the company’s price-to-earnings ratio to the industry average, the stock price appears justified. I used price-to-earnings in this case because there isn’t enough transparency to forecast its cash flows. The stock’s ratio of 25.39x is currently trading slightly above its industry peers’ ratio of 24.14x, meaning that if you bought World Wrestling Entertainment today, you would pay a relatively cheap price for it. And if you think World Wrestling Entertainment should trade at this level over the long term, then there should be only a fairly insignificant disadvantage against other industry peers. However, there might be an opportunity to buy in the future. This is because World Wrestling Entertainment’s beta (a measure of stock price volatility) is high, meaning its price action will be overblown relative to the rest of the market. When the market is down, the company’s shares are likely to fall more than the rest of the market, presenting a prime buying opportunity.

Can we expect growth from World Wrestling Entertainment?

Profit and Revenue Growth
NYSE: WWE Earnings and Revenue Growth November 9, 2022

Investors looking for growth in their portfolio should consider a company’s prospects before buying its stock. Although value investors would argue that intrinsic value relative to price matters most, a more compelling investment thesis would be high growth potential at a bargain price. With earnings growth expected to be 20% over the next several years, the future looks bright for World Wrestling Entertainment. It looks like there is more cash flow on the horizon for the stock, which should result in a higher stock valuation.

What that means for you

Are you a shareholder? WWE’s bullish future growth appears to have been priced into the current stock price, with shares trading around industry-standard price multiples. But there are other important factors that we haven’t considered today, such as the company’s financial strength. Have these factors changed since you last looked at WWE? Will you have enough confidence to invest in the company should the price fall below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on WWE, now might not be the best time to buy as it’s trading at industry-standard price multipliers. However, the optimistic outlook is encouraging for WWE, meaning it’s worth examining other factors like the strength of its balance sheet further to capitalize on the next share price drop.

With this in mind, it is important that you are aware of the risks involved if you wish to conduct further analysis about the company. At Simply Wall Street we found 1 warning sign for World Wrestling Entertainment and we think they deserve your attention.

When you are no longer interested in World Wrestling Entertainment, you can use our free platform to view our list of over 50 other high growth potential stocks.

The assessment is complex, but we help to simplify it.

find out if World Wrestling Entertainment may be over or under priced by reviewing our comprehensive analysis which includes the following Fair Value Estimates, Risks and Warnings, Dividends, Insider Trading and Financial Health.

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This Simply Wall St article is of a general nature. We provide comments based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended as financial advice. It is not a recommendation to buy or sell any stock and does not take into account your goals or financial situation. Our goal is to offer you long-term focused analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned.


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