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-stocks like SMMF sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could SMMF still be trading at a low price relative to its actual value? Let’s examine SMMF’s valuation and outlook in more detail to determine if there’s still a bargain opportunity. Check out our latest analysis for Summit Financial Group
What is SMMF worth?
According to my relative valuation model, SMMF seems to be currently fairly priced. In this instance, I’ve used the price-to-equity (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that SMMF’s ratio of 21.1x is trading slightly above its industry peers’ ratio of 17.8x, which means if you buy SMMF today, you’d be paying a relatively reasonable price for it. And if you believe SMMF should be trading in this range, then there isn’t really any room for the share price grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since SMMF’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much SMMF moves relative to the rest of the market.
What kind of growth will SMMF 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 SMMF future expectations. With profit expected to grow by 75.63% over the next couple of years, the future seems bright for SMMF. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? SMMF’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. 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 SMMF? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping an eye on SMMF, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for SMMF, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, 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 SMMF 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.
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.