At £0.275, Is It Time To Buy GAN plc (LON:GAN)?
GAN plc (AIM:GAN), a hospitality company based in United Kingdom, saw significant share price volatility over the past couple of months on the AIM, rising to the highs of £0.34 and falling to the lows of £0.25. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether GAN’s current trading price of £0.28 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 GAN’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 GAN
What’s the opportunity in GAN?
The stock seems fairly valued at the moment according to my relative valuation model. I’ve used the price-to-book ratio in this instance because there’s not enough visibility to forecast its cash flows, and its earnings doesn’t seem to reflect its true value. The stock’s ratio of 2.13x is currently trading slightly above its industry peers’ ratio of 1.7x, which means if you buy GAN today, you’d be paying a relatively fair price for it. And if you believe GAN should be trading in this range, then there isn’t really any room for the share price grow beyond what it’s currently trading. Furthermore, it seems like GAN’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.
What does the future of GAN look like?
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. 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. In GAN’s case, its revenues over the next few years are expected to grow by 44.14%, indicating a highly 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? GAN’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 GAN? 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 an eye on GAN, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for GAN, which means it’s worth further examining 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 GAN. You can find everything you need to know about GAN in the latest infographic research report. If you are no longer interested in GAN, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
