Yahoo Finance What Does Finsbury Food Group Plc's (LON:FIF) Share Price Indicate?
Finsbury Food Group Plc (LON:FIF), might not be a large cap stock, but it maintained its current share price over the past couple of month on the AIM, with a relatively tight range of UK£0.90 to UK£0.95. However, does this price actually reflect the true value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Finsbury Food Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
View our latest analysis for Finsbury Food Group
Is Finsbury Food Group still cheap?
The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. 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 9.51x is currently trading slightly below its industry peers’ ratio of 13.58x, which means if you buy Finsbury Food Group today, you’d be paying a reasonable price for it. And if you believe that Finsbury Food Group should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. So, is there another chance to buy low in the future? Given that Finsbury 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.
What kind of growth will Finsbury Food Group 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. Though in the case of Finsbury Food Group, it is expected to deliver a negative earnings growth of -4.4%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What this means for you:
Are you a shareholder? Currently, FIF appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on FIF, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on FIF for a while, now may not be the most optimal time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on FIF should the price fluctuate below the industry PE ratio.
So while earnings quality is important, it's equally important to consider the risks facing Finsbury Food Group at this point in time. At Simply Wall St, we found 1 warning sign for Finsbury Food Group and we think they deserve your attention.
If you are no longer interested in Finsbury Food Group, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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