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While Somero Enterprises, Inc. (LON:SOM) might not have the largest market cap around , it saw significant share price movement during recent months on the AIM, rising to highs of UK£3.78 and falling to the lows of UK£3.23. 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 Somero Enterprises' current trading price of UK£3.35 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 Somero Enterprises’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
See our latest analysis for Somero Enterprises
What's The Opportunity In Somero Enterprises?
Great news for investors – Somero Enterprises is still trading at a fairly cheap price according to our price multiple model, where we compare the company's price-to-earnings ratio 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 8.47x is currently well-below the industry average of 19.51x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, Somero Enterprises’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to move closer to its industry peers, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
What kind of growth will Somero Enterprises generate?
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. 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. However, with a negative profit growth of -18% expected next year, near-term growth certainly doesn’t appear to be a driver for a buy decision for Somero Enterprises. This certainty tips the risk-return scale towards higher risk.
What This Means For You
Are you a shareholder? Although SOM is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to SOM, or whether diversifying into another stock may be a better move for your total risk and return.