At UK£1.49, Is It Time To Put The Alumasc Group plc (LON:ALU) On Your Watch List?

The Alumasc Group plc (LON:ALU), is not the largest company out there, but it saw a double-digit share price rise of over 10% in the past couple of months on the AIM. Less-covered, small caps sees 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 take a look at Alumasc Group’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Alumasc Group

Is Alumasc Group Still Cheap?

According to my 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. 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 7.36x is currently trading slightly below its industry peers’ ratio of 9.79x, which means if you buy Alumasc Group today, you’d be paying a decent price for it. And if you believe that Alumasc Group 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. Is there another opportunity to buy low in the future? Since Alumasc 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 does the future of Alumasc Group look like?

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 a relatively muted revenue growth of 7.2% expected in the upcoming year, short term growth doesn’t seem like a key driver for a buy decision for Alumasc Group.

What This Means For You

Are you a shareholder? It seems like the market has already priced in ALU’s growth outlook, 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 ALU? 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 ALU, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Alumasc Group at this point in time. You'd be interested to know, that we found 3 warning signs for Alumasc Group and you'll want to know about these.

If you are no longer interested in Alumasc 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.