Why Northbridge Industrial Services plc (LON:NBI) Could Be Worth Watching

Northbridge Industrial Services plc (LON:NBI), might not be a large cap stock, but it saw a significant share price rise of over 20% 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? Today I will analyse the most recent data on Northbridge Industrial Services’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Northbridge Industrial Services

What is Northbridge Industrial Services worth?

Great news for investors – Northbridge Industrial Services is still trading at a fairly cheap price. My valuation model shows that the intrinsic value for the stock is £2.57, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. However, given that Northbridge Industrial Services’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 Northbridge Industrial Services?

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. However, with a relatively muted revenue growth of 8.5% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Northbridge Industrial Services, at least in the short term.

What this means for you:

Are you a shareholder? Even though growth is relatively muted, since NBI is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.

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

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example - Northbridge Industrial Services has 3 warning signs we think you should be aware of.

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

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.

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