When Should You Buy Trainline Plc (LON:TRN)?

While Trainline Plc (LON:TRN) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the LSE over the last few months, increasing to UK£2.89 at one point, and dropping to the lows of UK£2.28. 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 Trainline's current trading price of UK£2.42 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 Trainline’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 Trainline

What's The Opportunity In Trainline?

Trainline appears to be overvalued by 39% at the moment, based on my discounted cash flow valuation. The stock is currently priced at UK£2.42 on the market compared to my intrinsic value of £1.75. This means that the opportunity to buy Trainline at a good price has disappeared! But, is there another opportunity to buy low in the future? Since Trainline’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 does the future of Trainline look like?

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. With profit expected to grow by 98% over the next couple of years, the future seems bright for Trainline. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? TRN’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe TRN should trade below its current price, selling high and buying it back up again when its price falls towards its real value 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 tabs on TRN for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for TRN, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into Trainline, you'd also look into what risks it is currently facing. For example - Trainline has 1 warning sign we think you should be aware of.

If you are no longer interested in Trainline, 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.