When Should You Buy SciDev Limited (ASX:SDV)?

While SciDev Limited (ASX:SDV) might not be the most widely known stock at the moment, it saw a double-digit share price rise of over 10% in the past couple of months on the ASX. Less-covered, small caps sees 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? Today I will analyse the most recent data on SciDev’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for SciDev

Is SciDev Still Cheap?

SciDev is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that SciDev’s ratio of 56.03x is above its peer average of 23.25x, which suggests the stock is trading at a higher price compared to the Chemicals industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since SciDev’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from SciDev?

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. SciDev's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? It seems like the market has well and truly priced in SDV’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe SDV should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on SDV for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for SDV, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into SciDev, you'd also look into what risks it is currently facing. For example, we've discovered 3 warning signs that you should run your eye over to get a better picture of SciDev.

If you are no longer interested in SciDev, you can use our free platform to see our 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. 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. Simply Wall St has no position in any stocks mentioned.