Should You Buy SQS Software Quality Systems AG (AIM:SQS) Now?
SQS Software Quality Systems AG (AIM:SQS), a it services company based in Germany, saw significant share price volatility over the past couple of months on the AIM, rising to the highs of £5.93 and falling to the lows of £5.35. 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 SQS’s current trading price of £5.35 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 SQS’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 SQS Software Quality Systems
What is SQS worth?
Good news, investors! SQS is still a bargain right now. According to my valuation, the intrinsic value for the stock is £7.3, but it is currently trading at £5.35 on the share market, meaning that there is still an opportunity to buy now. Another thing to keep in mind is that SQS’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.
What does the future of SQS look like?
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. Though in the case of SQS, it is expected to deliver a relatively unexciting top-line growth of 8.54% in the next few years, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for SQS, at least in the near term.
What this means for you:
Are you a shareholder? Since SQS is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on SQS for a while, now might be the time to make a leap. Its prosperous future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy SQS. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed buy.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on SQS Software Quality Systems. You can find everything you need to know about SQS in the latest infographic research report. If you are no longer interested in SQS Software Quality Systems, 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.
