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Foxtons Group plc (LON:FOXT), 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£0.40 and falling to the lows of UK£0.35. 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 Foxtons Group's current trading price of UK£0.38 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 Foxtons Group’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 Foxtons Group
What's The Opportunity In Foxtons Group?
According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 Foxtons Group’s ratio of 10.48x is trading slightly below its industry peers’ ratio of 11.95x, which means if you buy Foxtons Group today, you’d be paying a decent price for it. And if you believe that Foxtons Group should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Is there another opportunity to buy low in the future? Since Foxtons Group’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
Can we expect growth from Foxtons Group?
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. 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. However, with a relatively muted profit growth of 4.7% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Foxtons Group, at least in the short term.
What This Means For You
Are you a shareholder? It seems like the market has already priced in FOXT’s growth outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at FOXT? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?