Is There Now An Opportunity In Egide S.A. (EPA:GID)?

By
Simply Wall St
Published
January 21, 2022
ENXTPA:GID
Source: Shutterstock

Egide S.A. (EPA:GID), is not the largest company out there, but it led the ENXTPA gainers with a relatively large price hike in the past couple of weeks. 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? Today I will analyse the most recent data on Egide’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Egide

What's the opportunity in Egide?

Good news, investors! Egide 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 Egide’s ratio of 14.74x is below its peer average of 26.5x, which indicates the stock is trading at a lower price compared to the Electronic industry. However, given that Egide’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from Egide?

earnings-and-revenue-growth
ENXTPA:GID Earnings and Revenue Growth January 21st 2022

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 revenues expected to grow by a double-digit 25% over the next couple of years, the outlook is positive for Egide. If the level of expenses is able to be maintained, 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? Since GID is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on GID for a while, now might be the time to enter the stock. Its prosperous future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy GID. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed assessment.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Be aware that Egide is showing 4 warning signs in our investment analysis and 2 of those can't be ignored...

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

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