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Is It Too Late To Consider Buying Velocity Composites plc (LON:VEL)?

Simply Wall St

Velocity Composites plc (LON:VEL), which is in the aerospace & defense business, and is based in United Kingdom, received a lot of attention from a substantial price increase on the AIM over the last few months. 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 Velocity Composites’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Velocity Composites

What is Velocity Composites worth?

Good news, investors! Velocity Composites is still a bargain right now. According to my valuation, the intrinsic value for the stock is £0.66, but it is currently trading at UK£0.42 on the share market, meaning that there is still an opportunity to buy now. What’s more interesting is that, Velocity Composites’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from Velocity Composites?

AIM:VEL Past and Future Earnings, January 17th 2020

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. With profit expected to grow by 51% over the next couple of years, the future seems bright for Velocity Composites. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? Since VEL is currently undervalued, it may be a great time to increase your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on VEL for a while, now might be the time to enter the stock. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy VEL. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Velocity Composites. You can find everything you need to know about Velocity Composites in the latest infographic research report. If you are no longer interested in Velocity Composites, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.

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. Thank you for reading.