Why Badger Infrastructure Solutions Ltd. (TSE:BDGI) Could Be Worth Watching

Badger Infrastructure Solutions Ltd. (TSE:BDGI), is not the largest company out there, but it saw a significant share price rise of over 20% in the past couple of months on the TSX. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Today I will analyse the most recent data on Badger Infrastructure Solutions’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Badger Infrastructure Solutions

What Is Badger Infrastructure Solutions Worth?

Great news for investors – Badger Infrastructure Solutions is still trading at a fairly cheap price according to my price multiple model, where I compare 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 Badger Infrastructure Solutions’s ratio of 26.81x is below its peer average of 32.21x, which indicates the stock is trading at a lower price compared to the Construction industry. Although, there may be another chance to buy again in the future. This is because Badger Infrastructure Solutions’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 Decent Returns From Badger Infrastructure Solutions?

What kind of returns can we expect from Badger Infrastructure Solutions in the future? It’s one thing to get a stock at a low price, but the quality of the company is even more important, as its stock may be cheap or expensive for a reason. A way to assess stock quality is by looking how much it returns to you as the investor compared to how much you’re invested. Badger Infrastructure Solutions is expected to return 20% of your investment in the upcoming year if you buy the stock today. This is a relatively good return on your investment which builds up the case for owning the stock.

What This Means For You

Are you a shareholder? Since BDGI is currently trading below the industry PE ratio, it may be a great time to accumulate more of 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 price multiple.

Are you a potential investor? If you’ve been keeping an eye on BDGI for a while, now might be the time to make a leap. Its prosperous future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy BDGI. 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.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, Badger Infrastructure Solutions has 3 warning signs (and 1 which is significant) we think you should know about.

If you are no longer interested in Badger Infrastructure Solutions, 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.