Investment Technology Group Inc (NYSE:ITG), a capital markets company based in United States, saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. 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 Investment Technology Group’s outlook and value based on the most recent financial data to see if the opportunity still exists. View our latest analysis for Investment Technology Group
Is Investment Technology Group still cheap?
According to my relative valuation model, the stock seems to be currently fairly priced. 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 1.88x is currently trading slightly below its industry peers’ ratio of 2.24x, which means if you buy Investment Technology Group today, you’d be paying a relatively fair price for it. And if you believe that Investment Technology Group should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because Investment Technology Group’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
Can we expect growth from Investment Technology Group?
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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. Investment Technology Group’s revenue growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. Unless expenses grow at the same level, or higher, this top-line growth should lead to robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? Investment Technology Group’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 track record of its management team. Have these factors changed since the last time you looked at Investment Technology Group? 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 Investment Technology Group, 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 Investment Technology Group, 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 Investment Technology Group. You can find everything you need to know about Investment Technology Group in the latest infographic research report. If you are no longer interested in Investment Technology Group, 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.