When Should You Buy ISPD Network, S.A. (EPA:ALISP)?

By
Simply Wall St
Published
March 23, 2022
ENXTPA:ALISP
Source: Shutterstock

ISPD Network, S.A. (EPA:ALISP), 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 ENXTPA. 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 ISPD Network’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for ISPD Network

What's the opportunity in ISPD Network?

ISPD Network appears to be expensive according to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and 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 ISPD Network’s ratio of 28.59x is above its peer average of 14.18x, which suggests the stock is trading at a higher price compared to the Media industry. Furthermore, ISPD Network’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach levels around its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

What does the future of ISPD Network look like?

earnings-and-revenue-growth
ENXTPA:ALISP Earnings and Revenue Growth March 23rd 2022

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. ISPD Network's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has well and truly priced in ALISP’s positive outlook, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe ALISP 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 ALISP 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 positive outlook is encouraging for ALISP, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. When we did our research, we found 5 warning signs for ISPD Network (1 is a bit concerning!) that we believe deserve your full attention.

If you are no longer interested in ISPD Network, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.