At UK£1.65, Is Cake Box Holdings Plc (LON:CBOX) Worth Looking At Closely?

Cake Box Holdings Plc (LON:CBOX), is not the largest company out there, but it saw a double-digit share price rise of over 10% in the past couple of months on the AIM. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s take a look at Cake Box Holdings’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for Cake Box Holdings

What's the opportunity in Cake Box Holdings?

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 13.28x is currently trading slightly below its industry peers’ ratio of 15.64x, which means if you buy Cake Box Holdings today, you’d be paying a reasonable price for it. And if you believe that Cake Box Holdings 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. So, is there another chance to buy low in the future? Given that Cake Box Holdings’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.

Can we expect growth from Cake Box Holdings?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. Cake Box Holdings' revenue growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. Unless expenses grow at the same level, or higher, this top-line growth should lead to robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? CBOX’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 track record of its management team. Have these factors changed since the last time you looked at CBOX? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on CBOX, 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 CBOX, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. You'd be interested to know, that we found 3 warning signs for Cake Box Holdings and you'll want to know about them.

If you are no longer interested in Cake Box Holdings, 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.