At UK£2.45, Is It Time To Put Volex plc (LON:VLX) On Your Watch List?

Volex plc (LON:VLX), is not the largest company out there, but it received a lot of attention from a substantial price movement on the AIM over the last few months, increasing to UK£3.68 at one point, and dropping to the lows of UK£2.41. 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 Volex's current trading price of UK£2.45 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 Volex’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Volex

Is Volex still cheap?

According to my valuation model, Volex seems to be fairly priced at around 3.1% below my intrinsic value, which means if you buy Volex today, you’d be paying a reasonable price for it. And if you believe the company’s true value is £2.52, then there’s not much of an upside to gain from mispricing. What's more, Volex’s share price may be more stable over time (relative to the market), as indicated by its low beta.

Can we expect growth from Volex?

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. Though in the case of Volex, it is expected to deliver a negative earnings growth of -4.5%, 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? Currently, VLX appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on VLX for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on VLX should the price fluctuate below its true value.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Volex.

If you are no longer interested in Volex, 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.