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Touchstar plc (LON:TST), is not the largest company out there, but it saw significant share price movement during recent months on the AIM, rising to highs of UK£1.00 and falling to the lows of UK£0.88. 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 Touchstar's current trading price of UK£0.96 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 Touchstar’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 Touchstar
What's The Opportunity In Touchstar?
According to our 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. 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 12.32x is currently trading slightly below its industry peers’ ratio of 12.81x, which means if you buy Touchstar today, you’d be paying a reasonable price for it. And if you believe that Touchstar 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. So, is there another chance to buy low in the future? Given that Touchstar’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from Touchstar?
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. Touchstar's revenue growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. Unless expenses grow at the same level, or higher, this top-line growth should lead to robust cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? It seems like the market has already priced in TST’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at TST? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?