Service Stream Limited (ASX:SSM), a construction company based in Australia, received a lot of attention from a substantial price increase on the ASX over the last few months. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s examine Service Stream’s valuation and outlook in more detail to determine if there’s still a bargain opportunity. Check out our latest analysis for Service Stream
Is Service Stream still cheap?
Good news, investors! Service Stream is still a bargain right now. My valuation model shows that the intrinsic value for the stock is A$2.06, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. Another thing to keep in mind is that Service Stream’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.
What does the future of Service Stream look like?
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. With profit expected to grow by 23.71% over the next couple of years, the future seems bright for Service Stream. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? Since SSM is currently undervalued, it may be a great time to increase your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on SSM for a while, now might be the time to enter the stock. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy SSM. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed buy.