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While Beacon Lighting Group Limited (ASX:BLX) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the ASX, rising to highs of AU$1.95 and falling to the lows of AU$1.66. 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 Beacon Lighting Group's current trading price of AU$1.80 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 Beacon Lighting Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
View our latest analysis for Beacon Lighting Group
Is Beacon Lighting Group Still Cheap?
The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. 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 Beacon Lighting Group’s ratio of 12.09x is trading in-line with its industry peers’ ratio, which means if you buy Beacon Lighting Group today, you’d be paying a relatively reasonable price for it. Although, there may be an opportunity to buy in the future. This is because Beacon Lighting Group’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will Beacon Lighting Group generate?
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. However, with a relatively muted profit growth of 5.4% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Beacon Lighting Group, at least in the short term.
What This Means For You
Are you a shareholder? BLX’s future growth appears to have been factored into the current share price, 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 BLX? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?