When Should You Buy PlaySide Studios Limited (ASX:PLY)?

PlaySide Studios Limited (ASX:PLY), is not the largest company out there, but it saw a decent share price growth of 19% on the ASX over the last few months. The company is inching closer to its yearly highs following the recent share price climb. 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? Let’s examine PlaySide Studios’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for PlaySide Studios

What Is PlaySide Studios Worth?

PlaySide Studios appears to be expensive according to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that PlaySide Studios’s ratio of 49.96x is above its peer average of 25.39x, which suggests the stock is trading at a higher price compared to the Entertainment industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that PlaySide Studios’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from PlaySide Studios?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. PlaySide Studios' 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 PLY’s positive outlook, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe PLY 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 tabs on PLY for some time, 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 positive outlook is encouraging for PLY, 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 PlaySide Studios, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 1 warning sign for PlaySide Studios and you'll want to know about it.

If you are no longer interested in PlaySide Studios, 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.