When Should You Buy Umanis SA (EPA:ALUMS)?

Umanis SA (EPA:ALUMS), 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 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 Umanis’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Umanis

What's the opportunity in Umanis?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 22.27x is currently trading slightly above its industry peers’ ratio of 21.3x, which means if you buy Umanis today, you’d be paying a relatively sensible price for it. And if you believe Umanis should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. Furthermore, it seems like Umanis’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

What does the future of Umanis look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Umanis' earnings over the next few years are expected to increase by 81%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has already priced in ALUMS’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at ALUMS? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on ALUMS, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for ALUMS, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you'd like to know more about Umanis as a business, it's important to be aware of any risks it's facing. Be aware that Umanis is showing 3 warning signs in our investment analysis and 1 of those shouldn't be ignored...

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

If you’re looking to trade Umanis, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

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