Is Now The Time To Look At Buying Johnson Service Group PLC (LON:JSG)?

While Johnson Service Group PLC (LON:JSG) might not have the largest market cap around , it saw significant share price movement during recent months on the AIM, rising to highs of UK£1.63 and falling to the lows of UK£1.45. 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 Johnson Service Group's current trading price of UK£1.45 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 Johnson Service Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Johnson Service Group

What's The Opportunity In Johnson Service Group?

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 Johnson Service Group’s ratio of 19.33x is trading slightly above its industry peers’ ratio of 17.82x, which means if you buy Johnson Service Group today, you’d be paying a relatively sensible price for it. And if you believe Johnson Service Group should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. So, is there another chance to buy low in the future? Given that Johnson Service Group’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of Johnson Service Group look like?

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. With profit expected to grow by 62% over the next couple of years, the future seems bright for Johnson Service Group. 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? JSG’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 financial strength of the company. Have these factors changed since the last time you looked at JSG? 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 JSG, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for JSG, 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 Johnson Service Group as a business, it's important to be aware of any risks it's facing. While conducting our analysis, we found that Johnson Service Group has 1 warning sign and it would be unwise to ignore this.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.