Is EnWave Corporation (TSXV:ENW) Undervalued?
EnWave Corporation (TSXV:ENW), a machinery company based in Canada, received a lot of attention from a substantial price increase on the TSXV in the over the last few months. Less covered, small-stocks like ENW sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could ENW still be trading at a low price relative to its actual value? Let’s take a look at ENW’s outlook and value based on the most recent financial data to see if the opportunity still exists. See our latest analysis for ENW
What’s the opportunity in ENW?
ENW is currently overpriced based on my relative valuation model. 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 11x is currently well-above the industry average of 1.2x, meaning that it is trading at a more expensive price relative to its peers. But, is there another opportunity to buy low in the future? Since ENW’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much ENW moves relative to the rest of the market.
What does the future of ENW 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. With revenue expected to more than double in the next few years, the future appears to be extremely bright for ENW. If expenses can also be maintained, it looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in ENW’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 ENW 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 ENW 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 ENW, 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 EnWave. You can find everything you need to know about ENW in the latest infographic research report. If you are no longer interested in EnWave, 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.
