AKKA Technologies SE (EPA:AKA), which is in the professional services business, and is based in Belgium, saw a significant share price rise of over 20% in the past couple of months on the ENXTPA. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s examine AKKA Technologies’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
View our latest analysis for AKKA Technologies
What's the opportunity in AKKA Technologies?
According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 AKKA Technologies’s ratio of 7.39x is trading slightly below its industry peers’ ratio of 8.83x, which means if you buy AKKA Technologies today, you’d be paying a decent price for it. And if you believe that AKKA Technologies should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Although, there may be an opportunity to buy in the future. This is because AKKA Technologies’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will AKKA Technologies 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. AKKA Technologies’s earnings over the next few years are expected to increase by 64%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? AKA’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. 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 AKA? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?