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PSB Industries (EPA:PSB), which is in the packaging business, and is based in France, saw a decent share price growth in the teens level on the ENXTPA over the last few months. Less-covered, small caps sees 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 PSB Industries’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Check out our latest analysis for PSB Industries
What's the opportunity in PSB Industries?
The stock seems fairly valued at the moment according to my relative valuation model. 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 PSB Industries’s ratio of 22.06x is trading in-line with its industry peers’ ratio, which means if you buy PSB Industries today, you’d be paying a relatively reasonable price for it. Is there another opportunity to buy low in the future? Since PSB Industries’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
Can we expect growth from PSB Industries?
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. PSB Industries’s earnings over the next few years are expected to increase by 45%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? PSB’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 PSB? 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 PSB, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic forecast is encouraging for PSB, 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.