While QUIZ plc (LON:QUIZ) might not be the most widely known stock at the moment, 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 QUIZ's valuation and outlook in more detail to determine if there's still a bargain opportunity.
Check out our latest analysis for QUIZ
What's The Opportunity In QUIZ?
Good news, investors! QUIZ 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. I've used the price-to-earnings ratio in this instance because there's not enough visibility to forecast its cash flows. The stock's ratio of 3.98x is currently well-below the industry average of 11.49x, meaning that it is trading at a cheaper price relative to its peers. Although, there may be another chance to buy again in the future. This is because QUIZ's beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company's shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What does the future of QUIZ look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. QUIZ's revenue growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. Unless expenses grow at the same level, or higher, this top-line growth should lead to robust cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? Since QUIZ is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With an optimistic 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 capital structure to consider, which could explain the current price multiple.
Are you a potential investor? If you've been keeping an eye on QUIZ for a while, now might be the time to make a leap. Its buoyant future outlook isn't fully reflected in the current share price yet, which means it's not too late to buy QUIZ. 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 investment decision.
So while earnings quality is important, it's equally important to consider the risks facing QUIZ at this point in time. In terms of investment risks, we've identified 2 warning signs with QUIZ, and understanding these should be part of your investment process.
If you are no longer interested in QUIZ, 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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