What Does 3i Infrastructure plc's (LON:3IN) Share Price Indicate?

3i Infrastructure plc (LON:3IN), a capital markets company based in Jersey, saw significant share price volatility over the past couple of months on the LSE, rising to the highs of £2.36 and falling to the lows of £2.06. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether 3i Infrastructure's current trading price of £2.26 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at 3i Infrastructure’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. Check out our latest analysis for 3i Infrastructure

What's the opportunity in 3i Infrastructure?

Great news for investors – 3i Infrastructure is still trading at a fairly cheap price. In this instance, I’ve used the price-to-equity (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that 3i Infrastructure’s ratio of 3.81x is below its peer average of 15.97x, which suggests the stock is undervalued compared to the Capital Markets industry. What’s more interesting is that, 3i Infrastructure’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to move to its intrinsic value, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from 3i Infrastructure?

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. Though in the case of 3i Infrastructure, it is expected to deliver a highly negative revenue growth over the next few years, 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? Although 3IN is currently undervalued, the adverse prospect of negative growth brings about some degree of risk. I recommend you think about whether you want to increase your portfolio exposure to 3IN, 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 an eye on 3IN for a while, but hesitant on making the leap, I 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.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on 3i Infrastructure. You can find everything you need to know about 3i Infrastructure in the latest infographic research report. If you are no longer interested in 3i Infrastructure, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.