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IDP Education Limited (ASX:IEL), is not the largest company out there, but it saw significant share price movement during recent months on the ASX, rising to highs of AU$13.34 and falling to the lows of AU$8.78. 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 IDP Education's current trading price of AU$9.57 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 IDP Education’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What's The Opportunity In IDP Education?
IDP Education is currently expensive based on our price multiple model, where we look at the company's price-to-earnings ratio in comparison to the industry average. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 28x is currently well-above the industry average of 15.15x, 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 IDP Education’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.
See our latest analysis for IDP Education
What does the future of IDP Education look like?
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. IDP Education's earnings over the next few years are expected to increase by 79%, 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? IEL’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe IEL 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.