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PharmX Technologies Limited (ASX:PHX), is not the largest company out there, but it saw a decent share price growth of 20% on the ASX over the last few months. While good news for shareholders, the company has traded much higher in the past year. As a small cap stock, hardly covered by any analysts, 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? Let’s take a look at PharmX Technologies’s outlook and value based on the most recent financial data to see if the opportunity still exists.
View our latest analysis for PharmX Technologies
What's The Opportunity In PharmX Technologies?
PharmX Technologies appears to be overvalued by 34% at the moment, based on our discounted cash flow valuation. The stock is currently priced at AU$0.03 on the market compared to our intrinsic value of A$0.02. This means that the opportunity to buy PharmX Technologies at a good price has disappeared! If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that PharmX Technologies’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will PharmX Technologies generate?
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. PharmX Technologies' 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? PHX’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe PHX should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on PHX for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for PHX, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.