Is Flowtech Fluidpower plc (LON:FLO) Potentially Undervalued?
While Flowtech Fluidpower plc (LON:FLO) might not have the largest market cap around , it saw a double-digit share price rise of over 10% in the past couple of months on the AIM. While good news for shareholders, the company has traded much higher in the past year. 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 examine Flowtech Fluidpower’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
See our latest analysis for Flowtech Fluidpower
What's The Opportunity In Flowtech Fluidpower?
According to our valuation model, Flowtech Fluidpower seems to be fairly priced at around 17% below our intrinsic value, which means if you buy Flowtech Fluidpower today, you’d be paying a fair price for it. And if you believe that the stock is really worth £0.98, then there isn’t much room for the share price grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since Flowtech Fluidpower’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What kind of growth will Flowtech Fluidpower 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. 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 Flowtech Fluidpower, it is expected to deliver a relatively unexciting top-line growth of 1.3% over the next year, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.
What This Means For You
Are you a shareholder? FLO’s 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 financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping tabs on FLO, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example, Flowtech Fluidpower has 3 warning signs (and 1 which is a bit unpleasant) we think you should know about.
If you are no longer interested in Flowtech Fluidpower, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
