At AU$0.10, Is Locality Planning Energy Holdings Limited (ASX:LPE) Worth Looking At Closely?
Locality Planning Energy Holdings Limited (ASX:LPE), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the ASX over the last few months, increasing to AU$0.17 at one point, and dropping to the lows of AU$0.10. 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 Locality Planning Energy Holdings' current trading price of AU$0.10 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 Locality Planning Energy Holdings’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 Locality Planning Energy Holdings
What's the opportunity in Locality Planning Energy Holdings?
Good news, investors! Locality Planning Energy Holdings is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. 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 Locality Planning Energy Holdings’s ratio of 10.63x is below its peer average of 47.54x, which indicates the stock is trading at a lower price compared to the Electric Utilities industry. However, given that Locality Planning Energy Holdings’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 Locality Planning Energy Holdings?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Locality Planning Energy Holdings, at least in the near future.
What this means for you:
Are you a shareholder? Although LPE is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to LPE, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping tabs on LPE for some time, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. When we did our research, we found 6 warning signs for Locality Planning Energy Holdings (4 make us uncomfortable!) that we believe deserve your full attention.
If you are no longer interested in Locality Planning Energy Holdings, 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.
