At kr.467, Is ChemoMetec A/S (CPH:CHEMM) Worth Looking At Closely?

While ChemoMetec A/S (CPH:CHEMM) might not be the most widely known stock at the moment, it led the CPSE gainers with a relatively large price hike in the past couple of weeks. 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 ChemoMetec’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for ChemoMetec

What's The Opportunity In ChemoMetec?

ChemoMetec 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 ChemoMetec’s ratio of 45.22x is above its peer average of 37.32x, which suggests the stock is trading at a higher price compared to the Life Sciences industry. But, is there another opportunity to buy low in the future? Since ChemoMetec’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.

Can we expect growth from ChemoMetec?

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. ChemoMetec's revenue growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. Unless expenses grow at the same level, or higher, this top-line growth should lead to robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? CHEMM’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe CHEMM 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 CHEMM 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 CHEMM, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into ChemoMetec, you'd also look into what risks it is currently facing. For example, ChemoMetec has 2 warning signs (and 1 which is concerning) we think you should know about.

If you are no longer interested in ChemoMetec, 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.