At €4.00, Is Hybrid Software Group PLC (EBR:HYSG) Worth Looking At Closely?

Hybrid Software Group PLC (EBR:HYSG), might not be a large cap stock, but it saw a double-digit share price rise of over 10% in the past couple of months on the ENXTBR. The recent share price gains has brought the company back closer to its yearly peak. 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 take a look at Hybrid Software Group’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Hybrid Software Group

What Is Hybrid Software Group Worth?

Hybrid Software Group is currently expensive based on our price multiple model, where we look at the company's price-to-earnings ratio in comparison to 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 Hybrid Software Group’s ratio of 34.54x is above its peer average of 28.21x, which suggests the stock is trading at a higher price compared to the Software industry. Furthermore, Hybrid Software Group’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach levels around its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

What kind of growth will Hybrid Software Group generate?

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. Hybrid Software Group'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 HYSG’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 HYSG 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 HYSG 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 HYSG, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Hybrid Software Group at this point in time. In terms of investment risks, we've identified 1 warning sign with Hybrid Software Group, and understanding this should be part of your investment process.

If you are no longer interested in Hybrid Software Group, 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.