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While Etalon Group PLC (LON:ETLN) might not be the most widely known stock at the moment, it maintained its current share price over the past couple of month on the LSE, with a relatively tight range of US$0.20 to US$0.20. However, does this price actually reflect the true value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Etalon Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
View our latest analysis for Etalon Group
What is Etalon Group worth?
Great news for investors – Etalon Group is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Etalon Group’s ratio of 1.46x is below its peer average of 9.12x, which indicates the stock is trading at a lower price compared to the Real Estate industry. What’s more interesting is that, Etalon Group’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to move closer to its industry peers, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
Can we expect growth from Etalon Group?
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 a negative profit growth of -14% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Etalon Group. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? Although ETLN is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to ETLN, 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 tabs on ETLN for some time, but hesitant on making the leap, I recommend you dig deeper 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.