When Should You Buy Sprue Aegis PLC (LON:SPRP)?
Sprue Aegis PLC (AIM:SPRP), a household durables company based in United Kingdom, saw significant share price volatility over the past couple of months on the AIM, rising to the highs of £2.1 and falling to the lows of £1.78. 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 Sprue Aegis’s current trading price of £1.84 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 Sprue Aegis’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 Sprue Aegis
Is Sprue Aegis still cheap?
Sprue Aegis is currently overpriced based on my relative valuation model. I’ve used the price-to-equity ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 22.9x is currently well-above the industry average of 11.6x, meaning that it is trading at a more expensive price relative to its peers. Furthermore, Sprue Aegis’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
What kind of growth will Sprue Aegis generate?
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. Sprue Aegis’s earnings over the next few years are expected to increase by 75.51%, 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 well and truly priced in Sprue Aegis’s positive outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe Sprue Aegis should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on Sprue Aegis for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for Sprue Aegis, which means it’s worth diving deeper into other factors 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 Sprue Aegis. You can find everything you need to know about Sprue Aegis in the latest infographic research report. If you are no longer interested in Sprue Aegis, 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.
