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Immedia Group Plc (LON:IME), which is in the media business, and is based in United Kingdom, received a lot of attention from a substantial price movement on the AIM over the last few months, increasing to £0.31 at one point, and dropping to the lows of £0.21. 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 Immedia Group's current trading price of £0.21 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 Immedia Group’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 Immedia Group
What is Immedia Group worth?
The stock seems fairly valued at the moment according to my relative valuation model. I’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 18.95x is currently trading slightly below its industry peers’ ratio of 23.66x, which means if you buy Immedia Group today, you’d be paying a fair price for it. And if you believe that Immedia Group should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. Furthermore, it seems like Immedia Group’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.
What kind of growth will Immedia Group generate?
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. With profit expected to grow by 96% over the next year, the near-term future seems bright for Immedia Group. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? It seems like the market has already priced in IME’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at IME? Will you have enough conviction to buy should the price fluctuate below the true value?