EnSync Inc (AMEX:ESNC), a electrical company based in United States, received a lot of attention from a substantial price movement on the AMEX over the last few months, increasing to $0.41 at one point, and dropping to the lows of $0.34. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether EnSync’s current trading price of $0.34 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 EnSync’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. Check out our latest analysis for EnSync
Is EnSync still cheap?
The stock seems fairly valued at the moment according to my relative valuation model. I’ve used the price-to-book ratio in this instance because there’s not enough visibility to forecast its cash flows, and its earnings doesn’t seem to reflect its true value. The stock’s ratio of 1.73x is currently trading slightly below its industry peers’ ratio of 1.93x, which means if you buy EnSync today, you’d be paying a relatively reasonable price for it. And if you believe that EnSync should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. Furthermore, EnSync’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 EnSync?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Though in the case of EnSync, it is expected to deliver a highly negative earnings growth in the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What this means for you:
Are you a shareholder? ESNC seems fairly priced right now, 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 ESNC, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on ESNC for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, 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 crystalize your views on ESNC should the price fluctuate below its true value.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on EnSync. You can find everything you need to know about EnSync in the latest infographic research report. If you are no longer interested in EnSync, 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.