Ophir Energy Plc (LSE:OPHR), an energy company based in United Kingdom, saw significant share price volatility over the past couple of months on the LSE, rising to the highs of £0.76 and falling to the lows of £0.52. 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 Ophir Energy’s current trading price of £0.53 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 Ophir Energy’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 Ophir Energy
What is Ophir Energy worth?The stock seems fairly valued at the moment according to my relative valuation model. In this instance, I’ve used the price-to-book (PB) ratio given that there is not enough information to reliably forecast the stock’s cash flows, and its earnings doesn’t seem to reflect its true value. I find that Ophir Energy’s ratio of 0.36x is trading slightly below its industry peers’ ratio of 0.83x, which means if you buy Ophir Energy today, you’d be paying a relatively reasonable price for it. And if you believe that Ophir Energy should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. Furthermore, Ophir Energy’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.
Can we expect growth from Ophir Energy?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. Ophir Energy’s earnings over the next few years are expected to increase by 88.32%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? OPHR’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. 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 OPHR? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping tabs on OPHR, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for OPHR, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Ophir Energy. You can find everything you need to know about Ophir Energy in the latest infographic research report. If you are no longer interested in Ophir Energy, you can use our free platform to see my list of over 50 other stocks with a high growth potential.