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Is 1pm plc (LON:OPM) Potentially Undervalued?

Simply Wall St

1pm plc (LON:OPM), which is in the diversified financial business, and is based in United Kingdom, received a lot of attention from a substantial price increase on the AIM over the last few months. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s take a look at 1pm’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for 1pm

What is 1pm worth?

According to my relative valuation model, the stock seems to be currently fairly priced. 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 1pm’s ratio of 4.69x is trading slightly below its industry peers’ ratio of 6.76x, which means if you buy 1pm today, you’d be paying a fair price for it. And if you believe 1pm should be trading in this range, then there isn’t much room for the share price grow beyond where it’s currently trading. Furthermore, it seems like 1pm’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 1pm look like?

AIM:OPM Past and Future Earnings, December 5th 2019

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. With profit expected to grow by 34% over the next couple of years, the future seems bright for 1pm. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? It seems like the market has already priced in OPM’s positive outlook, 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 OPM? Will you have enough conviction to buy should the price fluctuate below the true value?

Are you a potential investor? If you’ve been keeping an eye on OPM, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic forecast is encouraging for OPM, 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 1pm. You can find everything you need to know about 1pm in the latest infographic research report. If you are no longer interested in 1pm, 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.