Tempo Australia Limited (ASX:TPP), a professional services company based in Australia, received a lot of attention from a substantial price movement on the ASX over the last few months, increasing to A$0.21 at one point, and dropping to the lows of A$0.14. 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 Tempo Australia’s current trading price of A$0.14 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 Tempo Australia’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. Check out our latest analysis for Tempo Australia
What is Tempo Australia worth?The stock seems fairly valued at the moment according to my relative valuation model. I’ve used the price-to-book ratio in this instance because there’s not enough visibility to forecast its cash flows, and its earnings doesn’t seem to reflect its true value. The stock’s ratio of 1.17x is currently trading slightly below its industry peers’ ratio of 1.52x, which means if you buy Tempo Australia today, you’d be paying a relatively fair price for it. And if you believe Tempo Australia should be trading in this range, then there isn’t much room for the share price grow beyond what it’s currently trading. In addition to this, it seems like Tempo Australia’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.
What kind of growth will Tempo Australia 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. 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 revenue expected to more than double in the next few years, the future appears to be extremely bright for Tempo Australia. If expenses can also be maintained, 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? It seems like the market has already priced in TPP’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at TPP? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping tabs on TPP, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for TPP, which means it’s worth further examining 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 Tempo Australia. You can find everything you need to know about Tempo Australia in the latest infographic research report. If you are no longer interested in Tempo Australia, you can use our free platform to see my list of over 50 other stocks with a high growth potential.