Is It Time To Consider Buying TI Fluid Systems plc (LON:TIFS)?

TI Fluid Systems plc (LON:TIFS), is not the largest company out there, but it received a lot of attention from a substantial price movement on the LSE over the last few months, increasing to UK£1.69 at one point, and dropping to the lows of UK£1.36. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether TI Fluid Systems' current trading price of UK£1.48 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at TI Fluid Systems’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for TI Fluid Systems

What's The Opportunity In TI Fluid Systems?

According to our 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. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that TI Fluid Systems’s ratio of 10.44x is trading slightly below its industry peers’ ratio of 12.48x, which means if you buy TI Fluid Systems today, you’d be paying a reasonable price for it. And if you believe that TI Fluid Systems should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Although, there may be an opportunity to buy in the future. This is because TI Fluid Systems’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

Can we expect growth from TI Fluid Systems?

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. TI Fluid Systems' earnings over the next few years are expected to increase by 93%, 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? TIFS’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 track record of its management team. Have these factors changed since the last time you looked at TIFS? 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 TIFS, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for TIFS, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you want to dive deeper into TI Fluid Systems, you'd also look into what risks it is currently facing. To that end, you should learn about the 2 warning signs we've spotted with TI Fluid Systems (including 1 which shouldn't be ignored).

If you are no longer interested in TI Fluid Systems, 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.