Is It Too Late To Consider Buying Virgin Wines UK PLC (LON:VINO)?

Virgin Wines UK PLC (LON:VINO), 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. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s examine Virgin Wines UK’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Virgin Wines UK

Is Virgin Wines UK Still Cheap?

According to my 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. 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 13.27x is currently trading slightly below its industry peers’ ratio of 14.04x, which means if you buy Virgin Wines UK today, you’d be paying a decent price for it. And if you believe that Virgin Wines UK 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. Is there another opportunity to buy low in the future? Since Virgin Wines UK’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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 does the future of Virgin Wines UK 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 relatively muted revenue growth of 8.3% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Virgin Wines UK, at least in the short term.

What This Means For You

Are you a shareholder? VINO’s 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 VINO? Will you have enough conviction to buy should the price fluctuate below the the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on VINO, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Virgin Wines UK at this point in time. For instance, we've identified 3 warning signs for Virgin Wines UK (1 makes us a bit uncomfortable) you should be familiar with.

If you are no longer interested in Virgin Wines UK, 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.