Is PTB Group Limited (ASX:PTB) Potentially Undervalued?
PTB Group Limited (ASX:PTB), might not be a large cap stock, but it saw a double-digit share price rise of over 10% in the past couple of months on the ASX. 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 Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Check out our latest analysis for Group
What's the opportunity in Group?
Good news, investors! Group is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. 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 Group’s ratio of 13.2x is below its peer average of 32.26x, which indicates the stock is trading at a lower price compared to the Aerospace & Defense industry. Although, there may be another chance to buy again in the future. This is because Group’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
Can we expect growth from Group?
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. Group's earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? Since PTB is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With a positive profit outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current price multiple.
Are you a potential investor? If you’ve been keeping an eye on PTB for a while, now might be the time to make a leap. Its prosperous future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy PTB. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.
If you want to dive deeper into Group, you'd also look into what risks it is currently facing. While conducting our analysis, we found that Group has 1 warning sign and it would be unwise to ignore this.
If you are no longer interested in 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.
