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While Smiths News plc (LON:SNWS) might not have the largest market cap around , it received a lot of attention from a substantial price movement on the LSE over the last few months, increasing to UK£0.66 at one point, and dropping to the lows of UK£0.56. 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£0.58 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
What's The Opportunity In Smiths News?
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 5.92x is below its peer average of 12.01x, 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 kind of growth will Smiths News 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. However, with a relatively muted profit growth of 6.3% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Smiths News, at least in the short term.
What This Means For You
Are you a shareholder? Even though growth is relatively muted, since SNWS is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. However, there are also other factors such as financial health to consider, which could explain the current price multiple.