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Sligro Food Group N.V. (AMS:SLIGR), might not be a large cap stock, but it led the ENXTAM gainers with a relatively large price hike in the past couple of weeks. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine Sligro Food Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Check out our latest analysis for Sligro Food Group
What's The Opportunity In Sligro Food Group?
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 14.91x is currently trading slightly above its industry peers’ ratio of 13.26x, which means if you buy Sligro Food Group today, you’d be paying a relatively sensible price for it. And if you believe that Sligro Food Group should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. So, is there another chance to buy low in the future? Given that Sligro Food Group’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from Sligro Food Group?
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. With profit expected to grow by a double-digit 18% over the next couple of years, the outlook is positive for Sligro Food Group. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? It seems like the market has already priced in SLIGR’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at SLIGR? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?