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Is There Now An Opportunity In S4 Capital plc (LON:SFOR)?

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Simply Wall St
·3-min read
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While S4 Capital plc (LON:SFOR) might not be the most widely known stock at the moment, it saw a significant share price rise of over 20% in the past couple of months on the LSE. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s take a look at S4 Capital’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for S4 Capital

What's the opportunity in S4 Capital?

Great news for investors – S4 Capital is still trading at a fairly cheap price. According to my valuation, the intrinsic value for the stock is £8.03, but it is currently trading at UK£4.98 on the share market, meaning that there is still an opportunity to buy now. However, given that S4 Capital’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.

Can we expect growth from S4 Capital?

earnings-and-revenue-growth
earnings-and-revenue-growth

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. In S4 Capital's case, its revenues over the next couple of years are expected to double, indicating an incredibly optimistic future ahead. If expense does not increase by the same rate, or higher, this top line growth should lead to stronger cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? Since SFOR is currently undervalued, it may be a great time to increase your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on SFOR for a while, now might be the time to enter the stock. Its prosperous future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy SFOR. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.

So while earnings quality is important, it's equally important to consider the risks facing S4 Capital at this point in time. At Simply Wall St, we found 2 warning signs for S4 Capital and we think they deserve your attention.

If you are no longer interested in S4 Capital, 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. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.