Is PCF Group plc (AIM:PCF) Undervalued?
PCF Group plc (AIM:PCF), a consumer finance company based in United Kingdom, saw a decent share price growth in the teens level on the AIM over the last few months. Less covered, small-stocks like PCF sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could PCF still be trading at a low price relative to its actual value? Let’s examine PCF’s valuation and outlook in more detail to determine if there’s still a bargain opportunity. See our latest analysis for PCF
Is PCF still cheap?
According to my relative valuation model, PCF seems to be currently fairly priced. I’ve used the price-to-equity ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 17.5x is currently trading slightly above its industry peers’ ratio of 14.2x, which means if you buy PCF today, you’d be paying a relatively reasonable price for it. And if you believe PCF should be trading in this range, then there isn’t really any room for the share price grow beyond what it’s currently trading. Furthermore, PCF’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for PCF to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.
What does the future of PCF look like?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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 PCF future expectations. PCF’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? PCF’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 PCF? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping an eye on PCF, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for PCF, 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.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on PCF Group. You can find everything you need to know about PCF in the latest infographic research report. If you are no longer interested in PCF Group, 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.
