ISDN Holdings Limited (SGX:I07), is not the largest company out there, but it saw a double-digit share price rise of over 10% in the past couple of months on the SGX. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine ISDN Holdings’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for ISDN Holdings

What Is ISDN Holdings Worth?

According to our 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, 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 ISDN Holdings’s ratio of 32.4x is trading slightly above its industry peers’ ratio of 28.56x, which means if you buy ISDN Holdings today, you’d be paying a relatively sensible price for it. And if you believe that ISDN Holdings should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Is there another opportunity to buy low in the future? Since ISDN Holdings’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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 kind of growth will ISDN Holdings 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. ISDN Holdings' 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? I07’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 I07? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?