Is the FTSE 250’s biggest loser now the best undervalued stock to buy?

Jon Smith picks out a company that on the surface might appear to be undervalued, but explains why research is needed before deciding if it’s a stock to buy.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Black woman using smartphone at home, watching stock charts.

Image source: Getty Images

Over the past year, there’s been a divergence in performance for some of the most promising stocks in the market and ones that investors have clearly shunned. However, with some large-cap companies down over 50% in value during this period, they warrant further research to see whether they could be good undervalued stocks to buy. Here’s one I’m investigating.

A logical share price fall

I’m talking about Playtech (LSE:PTEC). It’s the stock that’s fallen the most over the past year that remains in the FTSE 250. The share price is down a staggering 63% in this period, but not all is as it appears.

Playtech’s a tech company serving the global gambling and gaming industry. It makes money from software licensing and platform fees, as well as earning fees from the gaming revenue generated from the operators’ platforms.

The bulk of the share price drop came in mid-2025, when Playtech paid a £1.5bn special dividend to shareholders. This came after selling the Snaitech brand to a competitor, which equated to roughly two-thirds of the company’s market value. On the ex-dividend date, the share price dropped by the dividend amount, so the stock mechanically slid by around 60% that day alone.

This means that even though the stock’s fallen, anyone who invested in the company over the past year would have banked the dividend. So in theory, they wouldn’t be financially down overall. But it raises the question of whether the stock’s undervalued now that it’s predominantly focusing on its B2B operations.

The outlook for 2026

The interim results from September showed that revenue across the US and Canada increased 64% versus the same time last year. This is clearly a growth market for the company, and an area where online gambling markets are expanding rapidly with more friendly state approvals.

After the divestment of Snaitech, the company has a much stronger balance sheet. With debt reduced and cash in the business, it means the company has the fuel to invest in new projects.

On the other hand, there are risks. From the Autumn Budget, online gaming taxes are rising from 21% to 40%. This will directly impact Playtech negatively.

Furthermore, some people won’t consider investing in the stock for ethical reasons. I’m in this boat, and don’t like having gambling businesses in my portfolio.

Given the reason for the share price drop, I don’t think Playtech’s undervalued. With a price-to-earnings ratio of 16.26, I think it’s fairly valued for a FTSE 250 growth stock. Even though there are promising signs of expansion outside of the UK, I think it’s too early to tell if there’s enough value in the B2B division to materially grow the business in the coming years.

As a result, I think there are better value picks in the index for investors to consider.

Jon Smith has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Growth Shares

UK coloured flags waving above large crowd on a stadium sport match.
Investing Articles

Why is everyone suddenly buying this dirt-cheap growth stock?

This beaten-down UK growth stock has suddenly become the centre of attention as investors target its recovery potential. The Iran…

Read more »

piggy bank, searching with binoculars
Investing Articles

Fresnillo share price rebounds as a FTSE 100 top mover after a 30% sell-off — what’s next?

The Fresnillo share price has surged today — Andrew Mackie asks whether this FTSE 100 mover is signalling a turning…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

What would £10,000 invested in Aviva shares 5 years ago be worth today?

Aviva shares have outperformed the FTSE 100 over the past five years. And the dividends have been impressive too. But…

Read more »

British pound data
Investing Articles

Could AI bring on the mother of all stock market crashes?

Some are predicting AI will lead to a stock market crash like we’ve never seen before. James Beard considers how…

Read more »

Couple working from home while daughter watches video on smartphone with headphones on
Investing Articles

How did Rolls-Royce shares add £5bn in market cap in one day?

Rolls-Royce shares have just had a brilliant day. Is this a sign the share price is about to go on…

Read more »

Friends at the bay near the village of Diabaig on the side of Loch Torridon in Wester Ross, Scotland. They are taking a break from their bike ride to relax and chat. They are laughing together.
Investing Articles

As Diageo shares sink, this ‘opposite’ stock in the FTSE 250 is soaring 

Diageo shares are falling due to lower demand for alcohol. But this backdrop is boosting other stocks such as this…

Read more »

Chalkboard representation of risk versus reward on a pair of scales
Investing Articles

Is BAE Systems the FTSE 100’s newest AI stock?

Defence stock BAE Systems has proved a good buy for investors of late, but could it get a further boost…

Read more »

Female Tesco employee holding produce crate
Investing Articles

Under £5 now! Here’s why I think Tesco’s share price should be trading closer to £7

Tesco’s share price looks too cheap to me for a business growing profits, boosting cash flow and undertaking buybacks at…

Read more »