Have Investors Already Priced In e-Therapeutics plc’s (AIM:ETX) Growth?
e-Therapeutics plc (AIM:ETX), a pharmaceuticals, biotechnology and life sciences company based in United Kingdom, received a lot of attention from a substantial price movement on the AIM in the over the last few months, increasing to £0.13 at one point, and dropping to the lows of £0.11. 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 ETX's current trading price of £0.11 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 ETX’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. See our latest analysis for ETX
What is ETX worth?
According to my relative valuation model, ETX seems to be currently fairly priced. 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 1.8x is currently trading slightly below its industry peers’ ratio of 1.9x, which means if you buy ETX today, you’d be paying a relatively fair price for it. And if you believe that ETX should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that ETX’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will ETX generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares.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 ETX future expectations. With profit expected to grow by 53.94% over the next couple of years, the future seems bright for ETX. 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? ETX’s optimistic 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 ETX? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping tabs on ETX, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for ETX, which 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.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on e-Therapeutics. You can find everything you need to know about ETX in the latest infographic research report. If you are no longer interested in e-Therapeutics, 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.
