St James’s Place plc (LSE:STJ), a capital markets company based in United Kingdom, saw a decent share price growth in the teens level on the LSE over the last few months. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s take a look at St. James’s Place’s outlook and value based on the most recent financial data to see if the opportunity still exists. Check out our latest analysis for St. James’s Place
Is St. James’s Place still cheap?
St. James’s Place is currently overpriced based on my relative valuation model. 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 51.71x is currently well-above the industry average of 17.85x, meaning that it is trading at a more expensive price relative to its peers. But, is there another opportunity to buy low in the future? Since St. James’s Place’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 the stock moves relative to the rest of the market.
What does the future of St. James’s Place look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. St. James’s Place’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? St. James’s Place’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 St. James’s Place 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 St. James’s Place 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 optimistic prospect is encouraging for St. James’s Place, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.