Image Scan Holdings Plc (LON:IGE), is not the largest company out there, but it led the AIM gainers with a relatively large price hike in the past couple of weeks. As a small cap stock, hardly covered by any analysts, 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 examine Image Scan Holdings's valuation and outlook in more detail to determine if there's still a bargain opportunity.
View our latest analysis for Image Scan Holdings
What Is Image Scan Holdings Worth?
Great news for investors - Image Scan Holdings is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I've used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock's cash flows. I find that Image Scan Holdings's ratio of 19.29x is below its peer average of 24.69x, which indicates the stock is trading at a lower price compared to the Electronic industry. What's more interesting is that, Image Scan Holdings'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.
What kind of growth will Image Scan Holdings 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. 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. In Image Scan Holdings' case, its earnings over the next year are expected to double, indicating an incredibly optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? Since IGE is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. With an optimistic profit 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 financial health to consider, which could explain the current price multiple.
Are you a potential investor? If you've been keeping an eye on IGE for a while, now might be the time to enter the stock. Its buoyant future profit outlook isn't fully reflected in the current share price yet, which means it's not too late to buy IGE. 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 assessment.
So while earnings quality is important, it's equally important to consider the risks facing Image Scan Holdings at this point in time. To that end, you should learn about the 4 warning signs we've spotted with Image Scan Holdings (including 2 which are potentially serious).
If you are no longer interested in Image Scan Holdings, 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.
Join A Paid User Research Session
You'll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here