Is Vesuvius plc (LON:VSVS) Potentially Undervalued?
While Vesuvius plc (LON:VSVS) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the LSE over the last few months, increasing to UK£4.48 at one point, and dropping to the lows of UK£3.95. 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 Vesuvius' current trading price of UK£4.14 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 Vesuvius’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 Vesuvius
What Is Vesuvius Worth?
Good news, investors! Vesuvius is still a bargain right now. According to my valuation, the intrinsic value for the stock is £5.47, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. However, given that Vesuvius’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will Vesuvius 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. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a negative profit growth of -16% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Vesuvius. This certainty tips the risk-return scale towards higher risk.
What This Means For You
Are you a shareholder? Although VSVS is currently undervalued, the negative outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to VSVS, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping an eye on VSVS for a while, but hesitant on making the leap, I recommend you research further into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. To help with this, we've discovered 2 warning signs (1 shouldn't be ignored!) that you ought to be aware of before buying any shares in Vesuvius.
If you are no longer interested in Vesuvius, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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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.
