Is It Too Late To Consider Buying Xilam Animation (EPA:XIL)?

While Xilam Animation (EPA:XIL) might not have the largest market cap around , it saw a double-digit share price rise of over 10% in the past couple of months on the ENXTPA. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. 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? Let’s take a look at Xilam Animation’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Xilam Animation

What's The Opportunity In Xilam Animation?

Great news for investors – Xilam Animation is still trading at a fairly cheap price according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. we find that Xilam Animation’s ratio of 10.23x is below its peer average of 13.95x, which indicates the stock is trading at a lower price compared to the Entertainment industry. What’s more interesting is that, Xilam Animation’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to move closer to its industry peers, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will Xilam Animation generate?

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 -17% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Xilam Animation. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Although XIL 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 XIL, 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 an eye on XIL for a while, but hesitant on making the leap, we 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.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Every company has risks, and we've spotted 2 warning signs for Xilam Animation you should know about.

If you are no longer interested in Xilam Animation, 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.