While Korvest Ltd (ASX:KOV) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the ASX, rising to highs of AU$8.30 and falling to the lows of AU$6.85. 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 Korvest's current trading price of AU$7.00 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 Korvest’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 Korvest
What Is Korvest Worth?
Good news, investors! Korvest is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 7.14x is currently well-below the industry average of 22.51x, meaning that it is trading at a cheaper price relative to its peers. Another thing to keep in mind is that Korvest’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 industry peers, 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 kind of growth will Korvest generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. However, with an expected decline of -7.3% in revenues over the next year, short term growth isn’t a driver for a buy decision for Korvest. This certainty tips the risk-return scale towards higher risk.
What This Means For You
Are you a shareholder? Although KOV is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to KOV, 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 KOV for a while, but hesitant on making the leap, I recommend you research further into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.