Information Services Corporation (TSE:ISV), which is in the real estate business, and is based in Canada, saw a double-digit share price rise of over 10% in the past couple of months on the TSX. 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 Information Services’s outlook and valuation to see if the opportunity still exists.
What’s the opportunity in Information Services?
Great news for investors – Information Services is still trading at a fairly cheap price. My valuation model shows that the intrinsic value for the stock is CA$22.32, but it is currently trading at CA$16.50 on the share market, meaning that there is still an opportunity to buy now. Information Services’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
What kind of growth will Information Services 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. 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 4.0% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Information Services, at least in the short term.
What this means for you:
Are you a shareholder? Even though growth is relatively muted, since ISV is currently undervalued, it may be a great time to increase your holdings in the stock. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on ISV for a while, now might be the time to make a leap. Its future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy ISV. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed buy.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Information Services. You can find everything you need to know about Information Services in the latest infographic research report. If you are no longer interested in Information Services, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned.
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