At US$02.57, Is It Time To Buy Pareteum Corporation (NYSEMKT:TEUM)?
Pareteum Corporation (NYSEMKT:TEUM), a telecom company based in United States, saw a double-digit share price rise of over 10% in the past couple of months on the AMEX. As a small cap stock, which tends to lack high analyst coverage, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s take a look at Pareteum’s outlook and value based on the most recent financial data to see if the opportunity still exists. Check out our latest analysis for Pareteum
What’s the opportunity in Pareteum?
Pareteum appears to be overvalued 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 7.72x is currently well-above the industry average of 1.88x, meaning that it is trading at a more expensive price relative to its peers. In addition to this, it seems like Pareteum’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
What kind of growth will Pareteum generate?
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 73.11% over the next year, the near-term future seems bright for Pareteum. 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? It seems like the market has well and truly priced in TEUM’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe TEUM 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 TEUM for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for TEUM, which means 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 Pareteum. You can find everything you need to know about Pareteum in the latest infographic research report. If you are no longer interested in Pareteum, 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.
