Should You Think About Buying Sopra Steria Group SA (EPA:SOP) Now?

While Sopra Steria Group SA (EPA:SOP) might not be the most widely known stock at the moment, it saw a double-digit share price rise of over 10% in the past couple of months on the ENXTPA. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s examine Sopra Steria Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Sopra Steria Group

What's the opportunity in Sopra Steria Group?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. 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 22.29x is currently trading slightly below its industry peers’ ratio of 25.56x, which means if you buy Sopra Steria Group today, you’d be paying a reasonable price for it. And if you believe Sopra Steria Group should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. Is there another opportunity to buy low in the future? Since Sopra Steria Group’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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 kind of growth will Sopra Steria Group generate?

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. With profit expected to grow by 84% over the next couple of years, the future seems bright for Sopra Steria Group. 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? SOP’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at SOP? 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 an eye on SOP, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for SOP, 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.

Since timing is quite important when it comes to individual stock picking, it's worth taking a look at what those latest analysts forecasts are. At Simply Wall St, we have the analysts estimates which you can view by clicking here.

If you are no longer interested in Sopra Steria Group, 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.