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Empresaria Group plc (LON:EMR), is not the largest company out there, but it saw a decent share price growth in the teens level on the AIM over the last few months. As a small cap stock, which tends to lack high analyst coverage, 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? Today I will analyse the most recent data on Empresaria Group’s outlook and valuation to see if the opportunity still exists.
Check out our latest analysis for Empresaria Group
Is Empresaria Group Still Cheap?
Good news, investors! Empresaria Group 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 9.36x is currently well-below the industry average of 16.57x, meaning that it is trading at a cheaper price relative to its peers. Empresaria Group’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
What kind of growth will Empresaria Group 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. With profit expected to grow by a double-digit 12% in the upcoming year, the short-term outlook is positive for Empresaria Group. It looks like higher cash flow 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 EMR is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. With a positive profit 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 capital structure to consider, which could explain the current price multiple.
Are you a potential investor? If you’ve been keeping an eye on EMR for a while, now might be the time to enter the stock. Its buoyant future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy EMR. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed assessment.