Is Now An Opportune Moment To Examine Staffline Group plc (LON:STAF)?
Staffline Group plc (LON:STAF), might not be a large cap stock, but it led the AIM gainers with a relatively large price hike in the past couple of weeks. Less-covered, small caps tend to present 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 take a look at Staffline Group’s outlook and value based on the most recent financial data to see if the opportunity still exists.
See our latest analysis for Staffline Group
What Is Staffline Group Worth?
Staffline Group appears to be expensive according to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Staffline Group’s ratio of 39.38x is above its peer average of 17.29x, which suggests the stock is trading at a higher price compared to the Professional Services industry. But, is there another opportunity to buy low in the future? Given that Staffline Group’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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from Staffline Group?
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 the company's future expectations. Staffline Group's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? STAF’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe STAF should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio 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 STAF 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 STAF, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, we've discovered 3 warning signs that you should run your eye over to get a better picture of Staffline Group.
If you are no longer interested in Staffline Group, 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.
