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Smiths News plc (LON:SNWS), might not be a large cap stock, but it saw significant share price movement during recent months on the LSE, rising to highs of UK£0.69 and falling to the lows of UK£0.57. 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 Smiths News' current trading price of UK£0.61 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 Smiths News’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 Smiths News
Is Smiths News Still Cheap?
Good news, investors! Smiths News 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. 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 Smiths News’s ratio of 5.73x is below its peer average of 12x, which indicates the stock is trading at a lower price compared to the Retail Distributors industry. Smiths News’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
What does the future of Smiths News 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. However, with a negative profit growth of -5.9% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Smiths News. This certainty tips the risk-return scale towards higher risk.
What This Means For You
Are you a shareholder? Although SNWS 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 SNWS, or whether diversifying into another stock may be a better move for your total risk and return.