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SRG Global Limited (ASX:SRG), is not the largest company out there, but it received a lot of attention from a substantial price increase on the ASX over the last few months. The company's trading levels have reached its high for the past year, following the recent bounce in the share price. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Today we will analyse the most recent data on SRG Global’s outlook and valuation to see if the opportunity still exists.
View our latest analysis for SRG Global
What's The Opportunity In SRG Global?
The stock seems fairly valued at the moment according to our valuation model. It’s trading around 9.9% below our intrinsic value, which means if you buy SRG Global today, you’d be paying a fair price for it. And if you believe that the stock is really worth A$1.27, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because SRG Global’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 kind of growth will SRG Global 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. With profit expected to grow by 70% over the next couple of years, the future seems bright for SRG Global. 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? SRG’s optimistic future growth appears to have been factored into the current share price, 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 SRG, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook 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.