While SDI Group plc (LON:SDI) might not be the most widely known stock at the moment, it saw a double-digit share price rise of over 10% in the past couple of months on the AIM. Less-covered, small caps sees 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? Today I will analyse the most recent data on SDI Group's outlook and valuation to see if the opportunity still exists.
View our latest analysis for SDI Group
Is SDI Group Still Cheap?
The stock seems fairly valued at the moment according to my valuation model. It's trading around 3.7% below my intrinsic value, which means if you buy SDI Group today, you'd be paying a fair price for it. And if you believe the company's true value is £1.79, then there isn't much room for the share price grow beyond what it's currently trading. Is there another opportunity to buy low in the future? Since SDI Group's share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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.
What kind of growth will SDI Group generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 relatively muted profit growth of 7.4% expected over the next couple of years, growth doesn't seem like a key driver for a buy decision for SDI Group, at least in the short term.
What This Means For You
Are you a shareholder? It seems like the market has already priced in SDI's future outlook, with shares trading around its fair value. However, there are also other important factors which we haven't considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you've been keeping an eye on SDI, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook means it's worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
If you'd like to know more about SDI Group as a business, it's important to be aware of any risks it's facing. While conducting our analysis, we found that SDI Group has 1 warning sign and it would be unwise to ignore this.
If you are no longer interested in SDI Group, 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.
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