Neo Industrial Plc (HEL:NEO1V), might not be a large cap stock, but it saw significant share price movement during recent months on the HLSE, rising to highs of €2.39 and falling to the lows of €2.14. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Neo Industrial's current trading price of €2.28 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Neo Industrial’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is Neo Industrial still cheap?
Great news for investors – Neo Industrial is still trading at a fairly cheap price. My valuation model shows that the intrinsic value for the stock is €3.44, but it is currently trading at €2.28 on the share market, meaning that there is still an opportunity to buy now. However, given that Neo Industrial’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.
Can we expect growth from Neo Industrial?
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. With revenues expected to grow by a double-digit 26% over the next couple of years, the outlook is positive for Neo Industrial. If the level of expenses is able to be maintained, it looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? Since NEO1V is currently undervalued, it may be a great time to increase your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on NEO1V for a while, now might be the time to make a leap. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy NEO1V. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed buy.
If you'd like to know more about Neo Industrial as a business, it's important to be aware of any risks it's facing. For example, we've found that Neo Industrial has 2 warning signs (1 shouldn't be ignored!) that deserve your attention before going any further with your analysis.
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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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