Headlam Group plc (LON:HEAD), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the LSE over the last few months, increasing to UK£3.19 at one point, and dropping to the lows of UK£2.60. 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 Headlam Group's current trading price of UK£2.70 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 Headlam Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Headlam Group

What's The Opportunity In Headlam Group?

According to my valuation model, the stock is currently overvalued by about 28%, trading at UK£2.70 compared to my intrinsic value of £2.12. This means that the opportunity to buy Headlam Group at a good price has disappeared! But, is there another opportunity to buy low in the future? Given that Headlam Group’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 kind of growth will Headlam Group 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. Though in the case of Headlam Group, it is expected to deliver a relatively unexciting earnings growth of 9.3%, 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? It seems like the market has well and truly priced in HEAD’s future outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe HEAD should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on HEAD for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook means it’s worth diving deeper into other factors in order to take advantage of the next price drop.