Is Now The Time To Look At Buying XP Power Limited (LON:XPP)?
XP Power Limited (LON:XPP), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the LSE over the last few months, increasing to UK£23.35 at one point, and dropping to the lows of UK£18.60. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether XP Power's current trading price of UK£18.66 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at XP Power’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Check out our latest analysis for XP Power
Is XP Power Still Cheap?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 12% below my intrinsic value, which means if you buy XP Power today, you’d be paying a fair price for it. And if you believe that the stock is really worth £21.27, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that XP Power’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from XP Power?
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. XP Power's revenue growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. Unless expenses grow at the same level, or higher, this top-line growth should lead to robust cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? It seems like the market has already priced in XPP’s positive outlook, 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 the stock? 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 tabs on XPP, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. While conducting our analysis, we found that XP Power has 2 warning signs and it would be unwise to ignore these.
If you are no longer interested in XP Power, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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