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While Supremex Inc. (TSE:SXP) might not have the largest market cap around , it received a lot of attention from a substantial price movement on the TSX over the last few months, increasing to CA$4.49 at one point, and dropping to the lows of CA$3.70. 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 Supremex's current trading price of CA$4.01 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 Supremex’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 Supremex
What Is Supremex Worth?
Good news, investors! Supremex is still a bargain right now according to our price multiple model, which compares 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 8.79x is currently well-below the industry average of 13.71x, meaning that it is trading at a cheaper price relative to its peers. However, given that Supremex’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of Supremex look like?
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. 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. Though in the case of Supremex, it is expected to deliver a relatively unexciting top-line growth of 1.6% over the next year, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.
What This Means For You
Are you a shareholder? Even though growth is relatively muted, since SXP is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.