What Does Snipp Interactive Inc.'s (CVE:SPN) Share Price Indicate?

While Snipp Interactive Inc. (CVE:SPN) might not be the most widely known stock at the moment, it saw a decent share price growth in the teens level on the TSXV over the last few months. 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 Snipp Interactive’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Snipp Interactive

What's The Opportunity In Snipp Interactive?

Snipp Interactive is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison 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 Snipp Interactive’s ratio of 18.71x is above its peer average of 12.87x, which suggests the stock is trading at a higher price compared to the Media industry. But, is there another opportunity to buy low in the future? Given that Snipp Interactive’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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of Snipp Interactive 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. With revenues expected to grow by 43% over the next year, the future seems bright for Snipp Interactive. If the level of expenses is able to be maintained, it looks like higher cash flow is on the cards for the stock in the upcoming year, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? It seems like the market has well and truly priced in SPN’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe SPN 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 SPN 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 SPN, 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 Snipp Interactive at this point in time. While conducting our analysis, we found that Snipp Interactive has 3 warning signs and it would be unwise to ignore them.

If you are no longer interested in Snipp Interactive, 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.