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Summit Financial Group, Inc. (NASDAQ:SMMF), operating in the financial services industry based in United States, led the NASDAQCM gainers with a relatively large price hike in the past couple of weeks. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine Summit Financial Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What is Summit Financial Group worth?
The stock seems fairly valued at the moment according to my relative valuation model. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 10.77x is currently trading slightly below its industry peers’ ratio of 13.57x, which means if you buy Summit Financial Group today, you’d be paying a reasonable price for it. And if you believe Summit Financial Group should be trading in this range, then there isn’t much room for the share price grow beyond where it’s currently trading. Furthermore, Summit Financial Group’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.
What kind of growth will Summit Financial Group generate?
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 the company’s future expectations. However, with a relatively muted profit growth of 5.6% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Summit Financial Group, at least in the short term.
What this means for you:
Are you a shareholder? It seems like the market has already priced in SMMF’s growth outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at SMMF? Will you have enough conviction to buy should the price fluctuate below the true value?
Are you a potential investor? If you’ve been keeping tabs on SMMF, now may not be the most optimal time to buy, given it is trading around its fair value. 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.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Summit Financial Group. You can find everything you need to know about Summit Financial Group in the latest infographic research report. If you are no longer interested in Summit Financial Group, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.