Enero Group Limited (ASX:EGG), might not be a large cap stock, but it led the ASX 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? Today I will analyse the most recent data on Enero Group's outlook and valuation to see if the opportunity still exists.
View our latest analysis for Enero Group
Is Enero Group Still Cheap?
Good news, investors! Enero Group is still a bargain right now according to my price multiple model, which compares 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 Enero Group's ratio of 12.02x is below its peer average of 22.48x, which indicates the stock is trading at a lower price compared to the Media industry. However, given that Enero 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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of Enero Group look like?
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. With profit expected to grow by 42% over the next couple of years, the future seems bright for Enero Group. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? Since EGG is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. With a positive 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 EGG for a while, now might be the time to make a leap. Its prosperous future profit outlook isn't fully reflected in the current share price yet, which means it's not too late to buy EGG. 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.
If you'd like to know more about Enero Group as a business, it's important to be aware of any risks it's facing. In terms of investment risks, we've identified 2 warning signs with Enero Group, and understanding these should be part of your investment process.
If you are no longer interested in Enero Group, 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.
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