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Borgestad ASA (OB:BOR), which is in the basic materials business, and is based in Norway, received a lot of attention from a substantial price movement on the OB over the last few months, increasing to kr31.00 at one point, and dropping to the lows of kr19.20. 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 Borgestad's current trading price of kr20.00 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 Borgestad’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Check out our latest analysis for Borgestad
Is Borgestad still cheap?
Borgestad appears to be overvalued according to my relative valuation model. I’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 22.09x is currently well-above the industry average of 13.03x, meaning that it is trading at a more expensive price relative to its peers. Furthermore, Borgestad’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 true value, 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 kind of growth will Borgestad generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Borgestad’s 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 BOR’s positive 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 BOR 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 BOR for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for BOR, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.