When Should You Buy Victoria PLC (LON:VCP)?

Victoria PLC (LON:VCP), 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£5.88 and falling to the lows of UK£4.58. 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 Victoria's current trading price of UK£4.88 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 Victoria’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 Victoria

Is Victoria Still Cheap?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 14.68x is currently trading slightly above its industry peers’ ratio of 10.09x, which means if you buy Victoria today, you’d be paying a relatively reasonable price for it. And if you believe Victoria 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. Although, there may be an opportunity to buy in the future. This is because Victoria’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.

What kind of growth will Victoria 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. Though in the case of Victoria, it is expected to deliver a negative earnings growth of -3.1%, 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, VCP appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on VCP, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on VCP for a while, now may not be the most optimal time to buy, given it is trading around industry price multiples. This 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 crystallize your views on VCP should the price fluctuate below the industry PE ratio.

If you want to dive deeper into Victoria, you'd also look into what risks it is currently facing. For instance, we've identified 2 warning signs for Victoria (1 shouldn't be ignored) you should be familiar with.

If you are no longer interested in Victoria, 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.