EQT Holdings Limited (ASX:EQT), a capital markets company based in Australia, saw a decent share price growth in the teens level on the ASX over the last few months. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Today I will analyse the most recent data on EQT Holdings’s outlook and valuation to see if the opportunity still exists. Check out our latest analysis for EQT Holdings

Is EQT Holdings still cheap?

According to my relative valuation model, the stock seems to be currently fairly priced. I’ve used the price-to-equity ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 23.84x is currently trading slightly above its industry peers’ ratio of 19.66x, which means if you buy EQT Holdings today, you’d be paying a relatively fair price for it. And if you believe that EQT Holdings should be trading at this level in the long run, there’s only an insignificant downside when the price falls to its real value. Furthermore, EQT Holdings’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

What kind of growth will EQT Holdings 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. With profit expected to grow by 38.10% over the next couple of years, the future seems bright for EQT Holdings. 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? EQT’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 EQT? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping tabs on EQT, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for EQT, 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.