Should You Think About Buying Beacon Lighting Group Limited (ASX:BLX) Now?
While Beacon Lighting Group Limited (ASX:BLX) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the ASX, rising to highs of AU$1.95 and falling to the lows of AU$1.66. 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 Beacon Lighting Group's current trading price of AU$1.80 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 Beacon Lighting Group’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 Beacon Lighting Group
Is Beacon Lighting Group Still Cheap?
The share price seems sensible at the moment according to my price multiple model, where I compare 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 Beacon Lighting Group’s ratio of 12.09x is trading in-line with its industry peers’ ratio, which means if you buy Beacon Lighting Group today, you’d be paying a relatively reasonable price for it. Although, there may be an opportunity to buy in the future. This is because Beacon Lighting 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.
What kind of growth will Beacon Lighting Group generate?
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. However, with a relatively muted profit growth of 5.4% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Beacon Lighting Group, at least in the short term.
What This Means For You
Are you a shareholder? BLX’s future growth appears to have been factored into the current share price, with shares trading around industry price multiples. 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 BLX? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?
Are you a potential investor? If you’ve been keeping tabs on BLX, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive growth outlook may mean it’s worth diving deeper into other factors 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. You'd be interested to know, that we found 1 warning sign for Beacon Lighting Group and you'll want to know about this.
If you are no longer interested in Beacon Lighting 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.
