Is Enero Group Limited (ASX:EGG) Potentially Undervalued?

While Enero Group Limited (ASX:EGG) might not be the most widely known stock at the moment, it led the ASX gainers with a relatively large price hike in the past couple of weeks. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Today I will analyse the most recent data on Enero Group’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Enero Group

What is Enero Group worth?

Great news for investors – Enero Group is still trading at a fairly cheap price. According to my valuation, the intrinsic value for the stock is A$4.18, but it is currently trading at AU$3.20 on the share market, meaning that there is still an opportunity to buy now. Although, there may be another chance to buy again in the future. This is because Enero 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.

Can we expect growth from Enero Group?

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 35% over the next couple of years, the future seems bright for Enero Group. It looks like higher cash flow 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 EGG 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 financial health to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on EGG for a while, now might be the time to make a leap. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy EGG. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed buy.

If you'd like to know more about Enero Group as a business, it's important to be aware of any risks it's facing. In terms of investment risks, we've identified 2 warning signs with Enero Group, and understanding these should be part of your investment process.

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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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