Is It Too Late To Consider Buying Supremex Inc. (TSE:SXP)?

Supremex Inc. (TSE:SXP), 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 Supremex’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Supremex

What's the opportunity in Supremex?

Good news, investors! Supremex is still a bargain right now. According to my valuation, the intrinsic value for the stock is CA$5.67, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. Although, there may be another chance to buy again in the future. This is because Supremex’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.

What does the future of Supremex look like?

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 Supremex, it is expected to deliver a relatively unexciting top-line growth of 3.3% in the next few years, 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 SXP is currently undervalued, it may be a great time to increase your holdings in the stock. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on SXP 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 SXP. 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 buy.

If you want to dive deeper into Supremex, you'd also look into what risks it is currently facing. For instance, we've identified 5 warning signs for Supremex (1 is a bit concerning) you should be familiar with.

If you are no longer interested in Supremex, 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.