Pinnacle Investment Management Group Limited (ASX:PNI), a capital markets company based in Australia, saw its share price hover around a small range of $3.07 to $3.34 over the last few weeks. But is this actually reflective of the share value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at PNI’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 Pinnacle Investment Management Group

What's the opportunity in PNI?

PNI appears to be overvalued according to my relative valuation model. In this instance, I’ve used the price-to-equity (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that PNI’s ratio of 39.1x is above its peer average of 21.6x, which suggests the stock is overvalued compared to the capital markets industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since PNI’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much PNI moves relative to the rest of the market.

Can we expect growth from PNI?

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 PNI future expectations. PNI’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? PNI’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe PNI should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on PNI for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for PNI, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.