Stock Analysis

Is There Now An Opportunity In Solocal Group S.A. (EPA:LOCAL)?

ENXTPA:LOCAL
Source: Shutterstock

While Solocal Group S.A. (EPA:LOCAL) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the ENXTPA, rising to highs of €0.71 and falling to the lows of €0.30. 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 Solocal Group's current trading price of €0.30 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 Solocal Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Solocal Group

What Is Solocal Group Worth?

Good news, investors! Solocal Group is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio 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 Solocal Group’s ratio of 1.74x is below its peer average of 49.83x, which indicates the stock is trading at a lower price compared to the Interactive Media and Services industry. What’s more interesting is that, Solocal Group’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. 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.

What does the future of Solocal Group look like?

earnings-and-revenue-growth
ENXTPA:LOCAL Earnings and Revenue Growth April 28th 2023

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 negative profit growth of -0.2% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Solocal Group. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Although LOCAL is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to LOCAL, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping tabs on LOCAL for some time, but hesitant on making the leap, I recommend you research further into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

So while earnings quality is important, it's equally important to consider the risks facing Solocal Group at this point in time. Be aware that Solocal Group is showing 6 warning signs in our investment analysis and 1 of those is a bit unpleasant...

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Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

About ENXTPA:LOCAL

Solocal Group

Provides digital services in France and internationally.

Moderate and fair value.

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