Should You Investigate IG Design Group plc (LON:IGR) At UK£6.10?

IG Design Group plc (LON:IGR), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the AIM over the last few months. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s take a look at IG Design Group’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for IG Design Group

What's the opportunity in IG Design Group?

IG Design Group appears to be expensive according to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. 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 IG Design Group’s ratio of 54.67x is above its peer average of 30.27x, which suggests the stock is trading at a higher price compared to the Consumer Durables industry. But, is there another opportunity to buy low in the future? Since IG Design Group’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. 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 kind of growth will IG Design Group generate?

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. IG Design Group's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has well and truly priced in IGR’s positive outlook, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe IGR should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on IGR for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for IGR, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about IG Design Group as a business, it's important to be aware of any risks it's facing. At Simply Wall St, we found 3 warning signs for IG Design Group and we think they deserve your attention.

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This article by Simply Wall St is general in nature. 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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