Yahoo Finance At UK£1.45, Is The Alumasc Group plc (LON:ALU) Worth Looking At Closely?
The Alumasc Group plc (LON:ALU), is not the largest company out there, but it received a lot of attention from a substantial price movement on the AIM over the last few months, increasing to UK£1.65 at one point, and dropping to the lows of UK£1.33. 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 Alumasc Group's current trading price of UK£1.45 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 Alumasc Group’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 Alumasc Group
Is Alumasc Group Still Cheap?
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. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Alumasc Group’s ratio of 5.4x is trading slightly below its industry peers’ ratio of 10.33x, which means if you buy Alumasc Group today, you’d be paying a decent price for it. And if you believe that Alumasc 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. Furthermore, Alumasc Group’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.
Can we expect growth from Alumasc Group?
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. However, with a negative profit growth of -4.3% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Alumasc Group. This certainty tips the risk-return scale towards higher risk.
What This Means For You
Are you a shareholder? ALU seems priced close to industry peers right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in 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 ALU, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on ALU for a while, now may not be the most advantageous 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 crystallize your views on ALU should the price fluctuate below the industry PE ratio.
So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, we've found that Alumasc Group has 4 warning signs (2 make us uncomfortable!) that deserve your attention before going any further with your analysis.
If you are no longer interested in Alumasc Group, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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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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