Elanor Investors Group (ASX:ENN), is not the largest company out there, but it received a lot of attention from a substantial price movement on the ASX over the last few months, increasing to AU$1.90 at one point, and dropping to the lows of AU$1.48. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Elanor Investors Group's current trading price of AU$1.57 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 Elanor Investors Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is Elanor Investors Group still cheap?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 3.6% below my intrinsic value, which means if you buy Elanor Investors Group today, you’d be paying a reasonable price for it. And if you believe the company’s true value is A$1.62, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because Elanor Investors Group’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will Elanor Investors Group 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 an extreme expected decline in the top-line over the next couple of years, near-term growth is certainly not a driver of a buy decision. Even with a larger decline in expenses, it seems like high uncertainty is on the cards for Elanor Investors Group.
What this means for you:
Are you a shareholder? Currently, ENN appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to de-risk 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 an eye on ENN for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, 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 ENN should the price fluctuate below its true value.
So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Elanor Investors Group.
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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.
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