Is Service Stream Limited (ASX:SSM) Undervalued?

Service Stream Limited (ASX:SSM), a construction company based in Australia, saw significant share price volatility over the past couple of months on the ASX, rising to the highs of A$1.65 and falling to the lows of A$1.46. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Service Stream's current trading price of A$1.52 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Service Stream’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. See our latest analysis for Service Stream

What's the opportunity in Service Stream?

Good news, investors! Service Stream is still a bargain right now. My valuation model shows that the intrinsic value for the stock is A$2.1, but it is currently trading at AU$1.52 on the share market, meaning that there is still an opportunity to buy now. Another thing to keep in mind is that Service Stream’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.

Can we expect growth from Service Stream?

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. With profit expected to grow by 25.05% over the next couple of years, the future seems bright for Service Stream. It looks like higher cash flows 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 SSM is currently undervalued, 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 undervaluation.

Are you a potential investor? If you’ve been keeping an eye on SSM for a while, now might be the time to enter the stock. Its prosperous future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy SSM. 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 buy.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Service Stream. You can find everything you need to know about Service Stream in the latest infographic research report. If you are no longer interested in Service Stream, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.