Is Now The Time To Look At Buying Asmallworld AG (VTX:ASWN)?

Asmallworld AG (VTX:ASWN), is not the largest company out there, but it saw a double-digit share price rise of over 10% in the past couple of months on the SWX. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. 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? Let’s examine Asmallworld’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Asmallworld

Is Asmallworld Still Cheap?

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 13.86x is currently trading slightly below its industry peers’ ratio of 15.67x, which means if you buy Asmallworld today, you’d be paying a decent price for it. And if you believe that Asmallworld should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Is there another opportunity to buy low in the future? Since Asmallworld’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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.

Can we expect growth from Asmallworld?

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 Asmallworld, it is expected to deliver a negative earnings growth of -3.1%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? ASWN seems priced close to industry peers right now, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on ASWN, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on ASWN for a while, now may not be the most advantageous time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystallize your views on ASWN should the price fluctuate below the industry PE ratio.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For instance, we've identified 3 warning signs for Asmallworld (1 shouldn't be ignored) you should be familiar with.

If you are no longer interested in Asmallworld, 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.