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While Eleco Plc (LON:ELCO) might not have the largest market cap around , it saw significant share price movement during recent months on the AIM, rising to highs of UK£0.97 and falling to the lows of UK£0.81. 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 Eleco's current trading price of UK£0.87 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 Eleco’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 Eleco
What's The Opportunity In Eleco?
The stock seems fairly valued at the moment according to our valuation model. It’s trading around 19% below our intrinsic value, which means if you buy Eleco today, you’d be paying a fair price for it. And if you believe the company’s true value is £1.08, then there’s not much of an upside to gain from mispricing. Furthermore, Eleco’s low beta implies that the stock is less volatile than the wider market.
What kind of growth will Eleco generate?
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. Eleco's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? ELCO’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping tabs on ELCO, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.