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Why Elanor Investors Group (ASX:ENN) Could Be Worth Watching

Elanor Investors Group (ASX:ENN), is not the largest company out there, but it saw significant share price movement during recent months on the ASX, rising to highs of AU$1.70 and falling to the lows of AU$1.44. 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 Elanor Investors Group's current trading price of AU$1.55 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 Elanor Investors Group’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 Elanor Investors Group

Is Elanor Investors Group still cheap?

According to my valuation model, Elanor Investors Group seems to be fairly priced at around 4.5% below my intrinsic value, which means if you buy Elanor Investors Group today, you’d be paying a reasonable price for it. And if you believe the company’s true value is A$1.62, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that Elanor Investors Group’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of Elanor Investors Group look like?

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

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 an extreme expected decline in the top-line over the next couple of years, near-term growth is certainly not a driver of a buy decision. Even with a larger decline in expenses, it seems like high uncertainty is on the cards for Elanor Investors Group.

What this means for you:

Are you a shareholder? ENN seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on ENN for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on ENN should the price fluctuate below its true value.

So while earnings quality is important, it's equally important to consider the risks facing Elanor Investors Group at this point in time. For example - Elanor Investors Group has 1 warning sign we think you should be aware of.

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

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. 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.

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

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