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What Does Surface Transforms Plc's (LON:SCE) Share Price Indicate?

Simply Wall St

Surface Transforms Plc (LON:SCE), which is in the auto components business, and is based in United Kingdom, saw significant share price movement during recent months on the AIM, rising to highs of UK£0.28 and falling to the lows of UK£0.20. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Surface Transforms's current trading price of UK£0.21 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Surface Transforms’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Surface Transforms

What's the opportunity in Surface Transforms?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 16% below my intrinsic value, which means if you buy Surface Transforms today, you’d be paying a fair price for it. And if you believe the company’s true value is £0.25, then there’s not much of an upside to gain from mispricing. What's more, Surface Transforms’s share price may be more stable over time (relative to the market), as indicated by its low beta.

What does the future of Surface Transforms look like?

AIM:SCE Past and Future Earnings, March 16th 2020

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. Surface Transforms’s earnings over the next few years are expected to increase by 83%, 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? SCE’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 track record of its management team. 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 SCE, 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.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Surface Transforms. You can find everything you need to know about Surface Transforms in the latest infographic research report. If you are no longer interested in Surface Transforms, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.