Is Polaris Renewable Energy Inc. (TSE:PIF) Potentially Undervalued?
Polaris Renewable Energy Inc. (TSE:PIF), might not be a large cap stock, but it saw significant share price movement during recent months on the TSX, rising to highs of CA$13.80 and falling to the lows of CA$12.30. 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 Polaris Renewable Energy's current trading price of CA$12.40 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 Polaris Renewable Energy’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
View our latest analysis for Polaris Renewable Energy
What Is Polaris Renewable Energy Worth?
According to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 Polaris Renewable Energy’s ratio of 14.52x is trading slightly below its industry peers’ ratio of 16.02x, which means if you buy Polaris Renewable Energy today, you’d be paying a decent price for it. And if you believe that Polaris Renewable Energy should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Furthermore, Polaris Renewable Energy’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 the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.
Can we expect growth from Polaris Renewable Energy?
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. 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. However, with an extremely negative double-digit change in profit expected next year, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Polaris Renewable Energy, at least in the near future.
What This Means For You
Are you a shareholder? Currently, PIF appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on PIF, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on PIF for a while, now may not be the most optimal time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystallize your views on PIF should the price fluctuate below the industry PE ratio.
Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. When we did our research, we found 4 warning signs for Polaris Renewable Energy (2 can't be ignored!) that we believe deserve your full attention.
If you are no longer interested in Polaris Renewable Energy, 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.
