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Lords Group Trading plc (LON:LORD), is not the largest company out there, but it saw a decent share price growth in the teens level on the AIM over the last few months. As a small cap stock, which tends to lack high analyst coverage, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Today I will analyse the most recent data on Lords Group Trading’s outlook and valuation to see if the opportunity still exists.
Check out our latest analysis for Lords Group Trading
What Is Lords Group Trading Worth?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 14.15% above my intrinsic value, which means if you buy Lords Group Trading today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth £0.56, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because Lords Group Trading’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What does the future of Lords Group Trading look like?
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. Lords Group Trading's earnings over the next few years are expected to increase by 65%, 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 LORD’s positive outlook, with shares trading around its fair value. 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 the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping tabs on LORD, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, 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.