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Touchstar plc (LON:TST), is not the largest company out there, but it saw significant share price movement during recent months on the AIM, rising to highs of UK£0.95 and falling to the lows of UK£0.82. 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 Touchstar's current trading price of UK£0.88 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 Touchstar’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 Touchstar
What's The Opportunity In Touchstar?
Great news for investors – Touchstar 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. 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 Touchstar’s ratio of 11.98x is below its peer average of 24.68x, which indicates the stock is trading at a lower price compared to the Communications industry. Although, there may be another chance to buy again in the future. This is because Touchstar’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
Can we expect growth from Touchstar?
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. Though in the case of Touchstar, it is expected to deliver a negative earnings growth of -17%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What This Means For You
Are you a shareholder? Although TST is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to TST, or whether diversifying into another stock may be a better move for your total risk and return.