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Emeco Holdings Limited (ASX:EHL), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the ASX over the last few months, increasing to AU$0.86 at one point, and dropping to the lows of AU$0.70. 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 Emeco Holdings' current trading price of AU$0.77 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 Emeco Holdings’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 Emeco Holdings
What's The Opportunity In Emeco Holdings?
Great news for investors – Emeco Holdings is still trading at a fairly cheap price according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. we find that Emeco Holdings’s ratio of 7.52x is below its peer average of 21.87x, which indicates the stock is trading at a lower price compared to the Trade Distributors industry. What’s more interesting is that, Emeco Holdings’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. 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 Emeco Holdings?
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. 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. Emeco Holdings' earnings over the next few years are expected to increase by 60%, 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? Since EHL is currently below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current price multiple.