Is It Time To Consider Buying Starrag Group Holding AG (VTX:STGN)?

Starrag Group Holding AG (VTX:STGN), might not be a large cap stock, but it saw a decent share price growth in the teens level on the SWX over the last few months. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s take a look at Starrag Group Holding’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Starrag Group Holding

What's the opportunity in Starrag Group Holding?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. I’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 33.01x is currently trading slightly above its industry peers’ ratio of 31.01x, which means if you buy Starrag Group Holding today, you’d be paying a relatively reasonable price for it. And if you believe Starrag Group Holding should be trading in this range, then there isn’t really any room for the share price 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 Starrag Group Holding’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.

What kind of growth will Starrag Group Holding generate?

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. Starrag Group Holding's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has already priced in STGN’s positive outlook, 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 STGN? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on STGN, 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 STGN, 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.

So while earnings quality is important, it's equally important to consider the risks facing Starrag Group Holding at this point in time. For example - Starrag Group Holding has 2 warning signs we think you should be aware of.

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This article by Simply Wall St is general in nature. 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.
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