In This Article:
Gear4music (Holdings) plc (LON:G4M), is not the largest company out there, but it received a lot of attention from a substantial price movement on the AIM over the last few months, increasing to UK£1.77 at one point, and dropping to the lows of UK£1.53. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Gear4music (Holdings)'s current trading price of UK£1.54 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Gear4music (Holdings)’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 Gear4music (Holdings)
What's The Opportunity In Gear4music (Holdings)?
According to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Gear4music (Holdings)’s ratio of 32.9x is above its peer average of 13.93x, which suggests the stock is trading at a higher price compared to the Specialty Retail industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Gear4music (Holdings)’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of Gear4music (Holdings) look like?
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. However, with a relatively muted revenue growth of 9.5% expected in the upcoming year, short term growth doesn’t seem like a key driver for a buy decision for Gear4music (Holdings).
What This Means For You
Are you a shareholder? G4M’s future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe G4M should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.