Is Iofina plc (LON:IOF) Potentially Undervalued?

Iofina plc (LON:IOF), might not be a large cap stock, but it saw significant share price movement during recent months on the AIM, rising to highs of UK£0.13 and falling to the lows of UK£0.11. 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 Iofina's current trading price of UK£0.12 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 Iofina’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 Iofina

What is Iofina worth?

Good news, investors! Iofina is still a bargain right now according to my price multiple model, which compares 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 14.92x is currently well-below the industry average of 42.13x, meaning that it is trading at a cheaper price relative to its peers. However, given that Iofina’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Iofina generate?

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. However, with a relatively muted revenue growth of 1.4% expected in the upcoming year, short term growth doesn’t seem like a key driver for a buy decision for Iofina.

What this means for you:

Are you a shareholder? Even though growth is relatively muted, since IOF is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. However, there are also other factors such as financial health to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on IOF for a while, now might be the time to enter the stock. Its future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy IOF. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, we've found that Iofina has 3 warning signs (1 doesn't sit too well with us!) that deserve your attention before going any further with your analysis.

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This article by Simply Wall St is general in nature. 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.
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