At UK£2.85, Is Focusrite plc (LON:TUNE) Worth Looking At Closely?

Focusrite plc (LON:TUNE), is not the largest company out there, but it saw significant share price movement during recent months on the AIM, rising to highs of UK£5.95 and falling to the lows of UK£2.85. 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 Focusrite's current trading price of UK£2.85 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 Focusrite’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Focusrite

What's The Opportunity In Focusrite?

Great news for investors – Focusrite is still trading at a fairly cheap price. Our valuation model shows that the intrinsic value for the stock is £4.59, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. However, given that Focusrite’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.

What does the future of Focusrite 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. However, with a negative profit growth of -19% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Focusrite. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Although TUNE is currently undervalued, the adverse prospect of negative growth brings about some degree of risk. We recommend you think about whether you want to increase your portfolio exposure to TUNE, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping tabs on TUNE for some time, but hesitant on making the leap, we recommend you dig deeper into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

If you'd like to know more about Focusrite as a business, it's important to be aware of any risks it's facing. When we did our research, we found 3 warning signs for Focusrite (1 can't be ignored!) that we believe deserve your full attention.

If you are no longer interested in Focusrite, 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.