Ellomay Capital Ltd (AMEX:ELLO), a renewable energy company based in Israel, saw significant share price volatility over the past couple of months on the AMEX, rising to the highs of $10.59 and falling to the lows of $8.41. 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 Ellomay Capital’s current trading price of $8.87 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 Ellomay Capital’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. Check out our latest analysis for Ellomay Capital
Is Ellomay Capital still cheap?
The stock seems fairly valued at the moment according to my relative valuation model. In this instance, I’ve used the price-to-book (PB) ratio given that there is not enough information to reliably forecast the stock’s cash flows, and its earnings doesn’t seem to reflect its true value. I find that Ellomay Capital’s ratio of 0.99x is trading slightly below its industry peers’ ratio of 1.04x, which means if you buy Ellomay Capital today, you’d be paying a relatively reasonable price for it. And if you believe that Ellomay Capital should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that Ellomay 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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from Ellomay Capital?
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. With revenues expected to grow by 99.54% over the next couple of years, the future seems bright for Ellomay Capital. If the level of expenses is able to be maintained, it looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? ELLO’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 ELLO? 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 ELLO, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for ELLO, 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 Ellomay Capital. You can find everything you need to know about Ellomay Capital in the latest infographic research report. If you are no longer interested in Ellomay Capital, 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.