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Is It Time To Consider Buying Keywords Studios plc (LON:KWS)?

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·3 min read
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Keywords Studios plc (LON:KWS), might not be a large cap stock, but it saw significant share price movement during recent months on the AIM, rising to highs of UK£27.18 and falling to the lows of UK£19.52. 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 Keywords Studios' current trading price of UK£21.34 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Keywords Studios’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 Keywords Studios

What is Keywords Studios worth?

According to my valuation model, the stock is currently overvalued by about 23%, trading at UK£21.34 compared to my intrinsic value of £17.31. This means that the opportunity to buy Keywords Studios at a good price has disappeared! Another thing to keep in mind is that Keywords Studios’s share price is quite stable relative to the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.

Can we expect growth from Keywords Studios?

earnings-and-revenue-growth
earnings-and-revenue-growth

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. Keywords Studios' earnings over the next few years are expected to increase by 100%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has well and truly priced in KWS’s positive outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe KWS should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on KWS for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for KWS, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into Keywords Studios, you'd also look into what risks it is currently facing. Case in point: We've spotted 1 warning sign for Keywords Studios you should be aware of.

If you are no longer interested in Keywords Studios, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.