What Is Vesuvius plc's (LON:VSVS) Share Price Doing?

While Vesuvius plc (LON:VSVS) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the LSE, rising to highs of UK£4.91 and falling to the lows of UK£4.14. 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 Vesuvius' current trading price of UK£4.52 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 Vesuvius’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 Vesuvius

Is Vesuvius 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. 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 Vesuvius’s ratio of 19.78x is trading slightly below its industry peers’ ratio of 24.26x, which means if you buy Vesuvius today, you’d be paying a decent price for it. And if you believe that Vesuvius 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 Vesuvius’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 Vesuvius?

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. With profit expected to more than double over the next couple of years, the future seems bright for Vesuvius. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? It seems like the market has already priced in VSVS’s positive 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 VSVS? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on VSVS, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for VSVS, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you'd like to know more about Vesuvius as a business, it's important to be aware of any risks it's facing. You'd be interested to know, that we found 1 warning sign for Vesuvius and you'll want to know about this.

If you are no longer interested in Vesuvius, 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.