Knights Group Holdings plc (LON:KGH), is not the largest company out there, but it saw a double-digit share price rise of over 10% in the past couple of months on the AIM. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Knights Group Holdings’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for Knights Group Holdings

What's the opportunity in Knights Group Holdings?

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. 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 Knights Group Holdings’s ratio of 25.78x is trading slightly above its industry peers’ ratio of 24x, which means if you buy Knights Group Holdings today, you’d be paying a relatively reasonable price for it. And if you believe Knights Group Holdings 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. Furthermore, Knights Group Holdings’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

What does the future of Knights Group Holdings look like?

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. Knights Group Holdings' earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? KGH’s optimistic 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 KGH? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?