Is Now The Time To Look At Buying Innelec Multimédia SA (EPA:ALINN)?

Innelec Multimédia SA (EPA:ALINN), is not the largest company out there, but it saw a significant share price rise of over 20% in the past couple of months on the ENXTPA. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine Innelec Multimédia’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Innelec Multimédia

What's the opportunity in Innelec Multimédia?

Great news for investors – Innelec Multimédia is still trading at a fairly cheap price according to my price multiple model, where I compare 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 Innelec Multimédia’s ratio of 4.74x is below its peer average of 21.77x, which indicates the stock is trading at a lower price compared to the Electronic industry. What’s more interesting is that, Innelec Multimédia’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 kind of growth will Innelec Multimédia 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. 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. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Innelec Multimédia, at least in the near future.

What this means for you:

Are you a shareholder? Although ALINN 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 ALINN, 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 ALINN for a while, but hesitant on making the leap, I recommend you dig deeper 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. For example, Innelec Multimédia has 4 warning signs (and 3 which can't be ignored) we think you should know about.

If you are no longer interested in Innelec Multimédia, 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. 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.
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