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When Should You Buy FlexiGroup Limited (ASX:FXL)?

Simply Wall St

FlexiGroup Limited (ASX:FXL), which is in the consumer finance business, and is based in Australia, saw significant share price movement during recent months on the ASX, rising to highs of AU$2.40 and falling to the lows of AU$1.81. 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 FlexiGroup's current trading price of AU$1.96 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 FlexiGroup’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 FlexiGroup

Is FlexiGroup still cheap?

According to my valuation model, FlexiGroup seems to be fairly priced at around 6.1% below my intrinsic value, which means if you buy FlexiGroup today, you’d be paying a fair price for it. And if you believe the company’s true value is A$2.08, then there isn’t much room for the share price grow beyond what it’s currently trading. So, is there another chance to buy low in the future? Given that FlexiGroup’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 FlexiGroup?

ASX:FXL Past and Future Earnings, January 10th 2020

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. FlexiGroup’s earnings over the next few years are expected to increase by 50%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has already priced in FXL’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 financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping an eye on FXL, 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 the company, which means it’s worth diving deeper into 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 FlexiGroup. You can find everything you need to know about FlexiGroup in the latest infographic research report. If you are no longer interested in FlexiGroup, 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.