Is GROUPE SFPI SA (EPA:SFPI) Potentially Undervalued?

While GROUPE SFPI SA (EPA:SFPI) might not be the most widely known stock at the moment, 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? Today I will analyse the most recent data on GROUPE SFPI’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for GROUPE SFPI

What's the opportunity in GROUPE SFPI?

Good news, investors! GROUPE SFPI 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 GROUPE SFPI’s ratio of 7.96x is below its peer average of 16.2x, which indicates the stock is trading at a lower price compared to the Electronic industry. What’s more interesting is that, GROUPE SFPI’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 GROUPE SFPI generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Though in the case of GROUPE SFPI, it is expected to deliver a negative earnings growth of -19%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What this means for you:

Are you a shareholder? Although SFPI is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. I recommend you think about whether you want to increase your portfolio exposure to SFPI, 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 tabs on SFPI for some time, but hesitant on making the leap, I 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.

If you want to dive deeper into GROUPE SFPI, you'd also look into what risks it is currently facing. When we did our research, we found 2 warning signs for GROUPE SFPI (1 is significant!) that we believe deserve your full attention.

If you are no longer interested in GROUPE SFPI, 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.