Is It Time To Consider Buying SigmaRoc plc (LON:SRC)?

SigmaRoc plc (LON:SRC), is not the largest company out there, but it received a lot of attention from a substantial price increase on the AIM over the last few months. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Today I will analyse the most recent data on SigmaRoc’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for SigmaRoc

What's the opportunity in SigmaRoc?

According to my valuation model, SigmaRoc seems to be fairly priced at around 9.8% below my intrinsic value, which means if you buy SigmaRoc today, you’d be paying a reasonable price for it. And if you believe the company’s true value is £0.96, then there isn’t much room for the share price grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since SigmaRoc’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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 kind of growth will SigmaRoc generate?

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. SigmaRoc's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? SRC’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 financial strength of the company. Have these factors changed since the last time you looked at the stock? 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 an eye on SRC, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, 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.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example - SigmaRoc has 3 warning signs we think you should be aware of.

If you are no longer interested in SigmaRoc, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

If you decide to trade SigmaRoc, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.