Is BigBen Interactive (EPA:BIG) Potentially Undervalued?

BigBen Interactive (EPA:BIG), is not the largest company out there, but it received a lot of attention from a substantial price increase on the ENXTPA over the last few months. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s examine BigBen Interactive’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for BigBen Interactive

What is BigBen Interactive worth?

According to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. 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 BigBen Interactive’s ratio of 23.01x is above its peer average of 13.05x, which suggests the stock is trading at a higher price compared to the Consumer Durables industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since BigBen Interactive’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 BigBen Interactive?

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 profit expected to more than double over the next couple of years, the future seems bright for BigBen Interactive. 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? It seems like the market has well and truly priced in BIG’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe BIG 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 tabs on BIG for some time, 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 positive outlook is encouraging for BIG, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. While conducting our analysis, we found that BigBen Interactive has 1 warning sign and it would be unwise to ignore this.

If you are no longer interested in BigBen Interactive, 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.