Should You Think About Buying Vita Group Limited (ASX:VTG) Now?

Vita Group Limited (ASX:VTG), is not the largest company out there, but 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 Vita Group’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Vita Group

What's the opportunity in Vita Group?

Great news for investors – Vita Group is still trading at a fairly cheap price. According to my valuation, the intrinsic value for the stock is A$1.37, but it is currently trading at AU$0.94 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 Vita 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 Vita Group?

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. Though in the case of Vita Group, it is expected to deliver a relatively unexciting earnings growth of 4.8%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.

What this means for you:

Are you a shareholder? Even though growth is relatively muted, since VTG is currently undervalued, it may be a great time to increase your holdings in the stock. 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 VTG for a while, now might be the time to make a leap. Its future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy VTG. 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.

So while earnings quality is important, it's equally important to consider the risks facing Vita Group at this point in time. You'd be interested to know, that we found 1 warning sign for Vita Group and you'll want to know about this.

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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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