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While Van Elle Holdings plc (LON:VANL) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase on the AIM over the last few months. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s take a look at Van Elle Holdings’s outlook and value based on the most recent financial data to see if the opportunity still exists.
Check out our latest analysis for Van Elle Holdings
What is Van Elle Holdings worth?
Van Elle Holdings is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Van Elle Holdings’s ratio of 78.33x is above its peer average of 13.49x, which suggests the stock is trading at a higher price compared to the Construction industry. Another thing to keep in mind is that Van Elle Holdings’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards the levels of its industry peers over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard for it to fall back down into an attractive buying range again.
What does the future of Van Elle Holdings 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. 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. Van Elle 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? It seems like the market has well and truly priced in VANL’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe VANL should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.