Driver Group plc (LON:DRV), 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£0.58 and falling to the lows of UK£0.48. 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 Driver Group's current trading price of UK£0.49 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 Driver Group’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 Driver Group

Is Driver Group still cheap?

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 19.29x is currently trading slightly above its industry peers’ ratio of 17.93x, which means if you buy Driver Group today, you’d be paying a relatively reasonable price for it. And if you believe that Driver Group should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Is there another opportunity to buy low in the future? Since Driver Group’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 Driver 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. Though in the case of Driver Group, it is expected to deliver a relatively unexciting top-line growth of 0.05% in the next few years, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.

What this means for you:

Are you a shareholder? It seems like the market has already priced in DRV’s growth outlook, 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 DRV? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?