At CA$20.26, Is Pollard Banknote Limited (TSE:PBL) Worth Looking At Closely?

While Pollard Banknote Limited (TSE:PBL) might not have the largest market cap around , it received a lot of attention from a substantial price movement on the TSX over the last few months, increasing to CA$23.23 at one point, and dropping to the lows of CA$18.65. 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 Pollard Banknote's current trading price of CA$20.26 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 Pollard Banknote’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

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What's The Opportunity In Pollard Banknote?

The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 15.17x is currently trading slightly below its industry peers’ ratio of 15.59x, which means if you buy Pollard Banknote today, you’d be paying a reasonable price for it. And if you believe Pollard Banknote should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. So, is there another chance to buy low in the future? Given that Pollard Banknote’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

Check out our latest analysis for Pollard Banknote

What does the future of Pollard Banknote look like?

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. In the upcoming year, Pollard Banknote's earnings are expected to increase by 45%, 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? PBL’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at PBL? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on PBL, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for PBL, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you want to dive deeper into Pollard Banknote, you'd also look into what risks it is currently facing. At Simply Wall St, we found 1 warning sign for Pollard Banknote and we think they deserve your attention.

If you are no longer interested in Pollard Banknote, 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.