Should You Investigate EVS Broadcast Equipment SA (EBR:EVS) At €18.50?

EVS Broadcast Equipment SA (EBR:EVS), might not be a large cap stock, but it saw significant share price movement during recent months on the ENXTBR, rising to highs of €22.00 and falling to the lows of €18.50. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether EVS Broadcast Equipment's current trading price of €18.50 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at EVS Broadcast Equipment’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for EVS Broadcast Equipment

What's the opportunity in EVS Broadcast Equipment?

Good news, investors! EVS Broadcast Equipment is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that EVS Broadcast Equipment’s ratio of 7.1x is below its peer average of 20.99x, which indicates the stock is trading at a lower price compared to the Communications industry. EVS Broadcast Equipment’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 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.

Can we expect growth from EVS Broadcast Equipment?

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. However, with a negative profit growth of -3.9% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for EVS Broadcast Equipment. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? Although EVS is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to EVS, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping tabs on EVS for some time, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

So while earnings quality is important, it's equally important to consider the risks facing EVS Broadcast Equipment at this point in time. For instance, we've identified 2 warning signs for EVS Broadcast Equipment (1 shouldn't be ignored) you should be familiar with.

If you are no longer interested in EVS Broadcast Equipment, 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.