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SKS Technologies Group Limited (ASX:SKS), is not the largest company out there, but it saw a significant share price rise of 50% in the past couple of months on the ASX. While good news for shareholders, the company has traded much higher in the past year. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine SKS Technologies Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Check out our latest analysis for SKS Technologies Group
Is SKS Technologies Group Still Cheap?
SKS Technologies Group appears to be expensive according to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. We’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 35.53x is currently well-above the industry average of 18.36x, meaning that it is trading at a more expensive price relative to its peers. Another thing to keep in mind is that SKS Technologies Group’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.
Can we expect growth from SKS Technologies Group?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. SKS Technologies Group'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 SKS’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 SKS 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.