Payment Data Systems Inc (NASDAQ:PYDS), a it company based in United States, saw a decent share price growth in the teens level on the NasdaqCM over the last few months. Less-covered, small caps 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 the stock still be trading at a low price relative to its actual value? Let’s examine Payment Data Systems’s valuation and outlook in more detail to determine if there’s still a bargain opportunity. See our latest analysis for Payment Data Systems
What’s the opportunity in Payment Data Systems?
The stock seems fairly valued at the moment according to my relative valuation model. In this instance, I’ve used the price-to-book (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 Payment Data Systems’s ratio of 2.22x is trading slightly below its industry peers’ ratio of 3.77x, which means if you buy Payment Data Systems today, you’d be paying a relatively fair price for it. And if you believe Payment Data Systems should be trading in this range, then there isn’t much room for the share price grow beyond what it’s currently trading. Furthermore, it seems like Payment Data Systems’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.
What does the future of Payment Data Systems 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. In Payment Data Systems’s case, its revenues over the next few years are expected to grow by 95.57%, indicating a highly optimistic future ahead. If expense does not increase by the same rate, or higher, this top line growth should lead to stronger cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? PYDS’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 PYDS? 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 an eye on PYDS, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for PYDS, 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 Payment Data Systems. You can find everything you need to know about Payment Data Systems in the latest infographic research report. If you are no longer interested in Payment Data 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.