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Is Now The Time To Look At Buying Feelgood Svenska AB (publ) (STO:FEEL)?

Simply Wall St

Feelgood Svenska AB (publ) (STO:FEEL), which is in the healthcare business, and is based in Sweden, saw a double-digit share price rise of over 10% in the past couple of months on the OM. 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 examine Feelgood Svenska’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Feelgood Svenska

What's the opportunity in Feelgood Svenska?

The stock seems fairly valued at the moment according to my relative valuation model. 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 Feelgood Svenska’s ratio of 14.41x is trading slightly below its industry peers’ ratio of 18.83x, which means if you buy Feelgood Svenska today, you’d be paying a reasonable price for it. And if you believe Feelgood Svenska should be trading in this range, then there isn’t much room for the share price grow beyond where it’s currently trading. In addition to this, it seems like Feelgood Svenska’s share price is quite stable, which could mean 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 kind of growth will Feelgood Svenska generate?

OM:FEEL Past and Future Earnings, January 1st 2020

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 65% over the next couple of years, the future seems bright for Feelgood Svenska. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? FEEL’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 FEEL? Will you have enough conviction to buy should the price fluctuate below the true value?

Are you a potential investor? If you’ve been keeping tabs on FEEL, 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 FEEL, 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 Feelgood Svenska. You can find everything you need to know about Feelgood Svenska in the latest infographic research report. If you are no longer interested in Feelgood Svenska, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.