Silver Chef Limited (ASX:SIV), a trading companies and distributors company based in Australia, saw a decent share price growth in the teens level on the ASX over the last few months. As a small cap stock, which tends to lack high analyst coverage, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s take a look at SIV’s outlook and value based on the most recent financial data to see if the opportunity still exists. See our latest analysis for SIV

What is SIV worth?

The stock seems fairly valued at the moment according to my relative valuation model. I’ve used the price-to-equity ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 13.1x is currently trading slightly above its industry peers’ ratio of 12.4x, which means if you buy SIV today, you’d be paying a relatively reasonable price for it. And if you believe that SIV should be trading at this level in the long run, there’s only an insignificant downside when the price falls to its real value. Furthermore, SIV’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for SIV to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

Can we expect growth from SIV?

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 SIV future expectations. With profit expected to grow by 73.08% over the next couple of years, the future seems bright for SIV. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? SIV’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. 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 SIV? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping tabs on SIV, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for SIV, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.