Watchstone Group Plc (LON:WTG), a it company based in United Kingdom, received a lot of attention from a substantial price movement on the AIM over the last few months, increasing to £1.08 at one point, and dropping to the lows of £0.96. 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 Watchstone Group’s current trading price of £1.02 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 Watchstone Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. View out our latest analysis for Watchstone Group
Is Watchstone Group still cheap?
Great news for investors – Watchstone Group is still trading at a fairly cheap price. In this instance, I’ve used price-to-book ratio (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 Watchstone Group’s ratio of 0.72x is below its peer average of 3.13x, which suggests the stock is undervalued compared to the IT industry. Watchstone Group’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 Watchstone Group generate?
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. Watchstone Group’s earnings over the next few years are expected to increase by 61.72%, 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? Since WTG 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 WTG for a while, now might be the time to make a leap. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy WTG. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, 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 Watchstone Group. You can find everything you need to know about Watchstone Group in the latest infographic research report. If you are no longer interested in Watchstone 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.