Is It Too Late To Consider Buying 5N Plus Inc. (TSE:VNP)?

5N Plus Inc. (TSE:VNP), might not be a large cap stock, but it saw a significant share price rise of 112% in the past couple of months on the TSX. The recent jump in the share price has meant that the company is trading at close to its 52-week high. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s take a look at 5N Plus’s outlook and value based on the most recent financial data to see if the opportunity still exists.

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Is 5N Plus Still Cheap?

5N Plus appears to be expensive according to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and 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 36.66x is currently well-above the industry average of 10.45x, meaning that it is trading at a more expensive price relative to its peers. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since 5N Plus’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

View our latest analysis for 5N Plus

What does the future of 5N Plus look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. In the upcoming year, 5N Plus' earnings are expected to increase by 36%, 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? VNP’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe VNP 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 an eye on VNP for a while, 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 optimistic prospect is encouraging for VNP, 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 5N Plus at this point in time. At Simply Wall St, we found 1 warning sign for 5N Plus and we think they deserve your attention.

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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.