Safestay plc (LON:SSTY), which is in the hospitality 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 Safestay’s outlook and value based on the most recent financial data to see if the opportunity still exists.
What is Safestay worth?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 19.67% above my intrinsic value, which means if you buy Safestay today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth £0.31, there’s only an insignificant downside when the price falls to its real value. In addition to this, Safestay has a low beta, which suggests its share price is less volatile than the wider market.
What kind of growth will Safestay generate?
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. In Safestay’s case, its revenues over the next few years are expected to grow by 50%, indicating a highly optimistic future ahead. If expense does not increase by the same rate, or higher, this top line growth should lead to stronger cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? SSTY’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping tabs on SSTY, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Safestay. You can find everything you need to know about Safestay in the latest infographic research report. If you are no longer interested in Safestay, 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 firstname.lastname@example.org. 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.