Why Ripley Corp S.A. (SNSE:RIPLEY) Could Be Worth Watching

Ripley Corp S.A. (SNSE:RIPLEY), is not the largest company out there, but it received a lot of attention from a substantial price increase on the SNSE over the last few months. Less-covered, small caps tend to present 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 examine Ripley’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Ripley

What's the opportunity in Ripley?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. 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 9.52x is currently trading slightly below its industry peers’ ratio of 13.89x, which means if you buy Ripley today, you’d be paying a decent price for it. And if you believe Ripley should be trading in this range, then there isn’t much room for the share price to 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 Ripley’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 does the future of Ripley look like?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. However, with a relatively muted profit growth of 4.8% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Ripley, at least in the short term.

What this means for you:

Are you a shareholder? RIPLEY’s future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at RIPLEY? 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 RIPLEY, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about Ripley as a business, it's important to be aware of any risks it's facing. Be aware that Ripley is showing 3 warning signs in our investment analysis and 1 of those is concerning...

If you are no longer interested in Ripley, 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.