Victoria plc (LON:VCP), which is in the consumer durables business, and is based in United Kingdom, saw a significant share price rise of over 20% in the past couple of months on the AIM. Less-covered, small caps tend to present 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? Let’s take a look at Victoria’s outlook and value based on the most recent financial data to see if the opportunity still exists.
What is Victoria worth?
According to my valuation model, Victoria seems to be fairly priced at around 1.1% below my intrinsic value, which means if you buy Victoria today, you’d be paying a fair price for it. And if you believe the company’s true value is £2.05, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that Victoria’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of Victoria 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. However, with an expected decline of -0.3% in revenues over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Victoria. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? VCP seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on VCP for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on VCP should the price fluctuate below its true value.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Victoria. You can find everything you need to know about Victoria in the latest infographic research report. If you are no longer interested in Victoria, you can use our free platform to see my 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. 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. Thank you for reading.