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Is There Now An Opportunity In Premaitha Health PLC (LON:NIPT)?

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Pam Parks
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Premaitha Health PLC (AIM:NIPT), a medical equipment company based in United Kingdom, led the AIM gainers with a relatively large price hike in the past couple of weeks. 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 take a look at Premaitha Health’s outlook and value based on the most recent financial data to see if the opportunity still exists. Check out our latest analysis for Premaitha Health

Is Premaitha Health still cheap?

According to my relative valuation model, the stock is currently overvalued. In this instance, I’ve used price-to-book ratio (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 Premaitha Health’s ratio of 11.44x is above its peer average of 2.84x, which suggests the stock is overvalued compared to the Medical Equipment industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Premaitha Health’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.

What kind of growth will Premaitha Health generate?

AIM:NIPT Future Profit May 23rd 18
AIM:NIPT Future Profit May 23rd 18

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 profit expected to grow by 59.28% over the next couple of years, the future seems bright for Premaitha Health. 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 NIPT’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe NIPT 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 NIPT 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 positive outlook is encouraging for NIPT, 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 Premaitha Health. You can find everything you need to know about Premaitha Health in the latest infographic research report. If you are no longer interested in Premaitha Health, 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.