Should You Investigate Beacon Lighting Group Limited (ASX:BLX) At AU$1.65?

Beacon Lighting Group Limited (ASX:BLX), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the ASX over the last few months. Less-covered, small caps tend to present 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 Beacon Lighting Group’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Beacon Lighting Group

What's the opportunity in Beacon Lighting Group?

Good news, investors! Beacon Lighting Group is still a bargain right now. My valuation model shows that the intrinsic value for the stock is A$2.32, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. However, given that Beacon Lighting Group’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.

What kind of growth will Beacon Lighting 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. Beacon Lighting Group's earnings over the next few years are expected to increase by 22%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? Since BLX is currently undervalued, it may be a great time to increase your holdings in the stock. With a positive 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 capital structure to consider, which could explain the current undervaluation.

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

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. For example - Beacon Lighting Group has 3 warning signs we think you should be aware of.

If you are no longer interested in Beacon Lighting Group, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

When trading Beacon Lighting Group or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.