Should You Think About Buying Wynnstay Group Plc (LON:WYN) Now?

Wynnstay Group Plc (LON:WYN), is not the largest company out there, but it saw significant share price movement during recent months on the AIM, rising to highs of UK£6.40 and falling to the lows of UK£5.30. 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 Wynnstay Group's current trading price of UK£5.30 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 Wynnstay Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Wynnstay Group

Is Wynnstay Group Still Cheap?

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 9.77x is currently trading slightly below its industry peers’ ratio of 12.59x, which means if you buy Wynnstay Group today, you’d be paying a decent price for it. And if you believe that Wynnstay Group 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. Furthermore, Wynnstay Group’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.

What does the future of Wynnstay Group look like?

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. 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. Though in the case of Wynnstay Group, it is expected to deliver a highly negative earnings growth in 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? WYN seems priced close to industry peers right now, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on WYN, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on WYN for a while, now may not be the most optimal time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystallize your views on WYN should the price fluctuate below the industry PE ratio.

If you'd like to know more about Wynnstay Group as a business, it's important to be aware of any risks it's facing. To that end, you should learn about the 3 warning signs we've spotted with Wynnstay Group (including 1 which makes us a bit uncomfortable).

If you are no longer interested in Wynnstay Group, 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.