Is There Now An Opportunity In Staffline Group plc (LON:STAF)?
Staffline Group plc (LON:STAF), might not be a large cap stock, but it saw a decent share price growth of 15% on the AIM over the last few months. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. 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? Today we will analyse the most recent data on Staffline Group’s outlook and valuation to see if the opportunity still exists.
See our latest analysis for Staffline Group
Is Staffline Group Still Cheap?
According to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Staffline Group’s ratio of 28.94x is above its peer average of 21.65x, which suggests the stock is trading at a higher price compared to the Professional Services industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since Staffline Group’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. 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 Staffline Group generate?
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. 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? It seems like the market has well and truly priced in STAF’s positive outlook, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I 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 an eye on STAF for a while, 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.
If you want to dive deeper into Staffline Group, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 2 warning signs for Staffline Group you should know about.
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.
