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SigmaRoc plc (LON:SRC), might not be a large cap stock, but it saw significant share price movement during recent months on the AIM, rising to highs of UK£0.62 and falling to the lows of UK£0.54. 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 SigmaRoc's current trading price of UK£0.55 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 SigmaRoc’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 SigmaRoc
What's The Opportunity In SigmaRoc?
According to my 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. I’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 12.22x is currently trading slightly above its industry peers’ ratio of 10.39x, which means if you buy SigmaRoc today, you’d be paying a relatively sensible price for it. And if you believe SigmaRoc should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. Is there another opportunity to buy low in the future? Since SigmaRoc’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.
What kind of growth will SigmaRoc 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. 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. SigmaRoc's earnings over the next few years are expected to increase by 84%, 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? It seems like the market has already priced in SRC’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 SRC? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?