Is Now The Time To Look At Buying SigmaRoc plc (LON:SRC)?

While SigmaRoc plc (LON:SRC) might not have the largest market cap around , it saw a decent share price growth of 14% on the AIM over the last few months. The company is now trading at yearly-high levels following the recent surge in its share price. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Let’s examine SigmaRoc’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for SigmaRoc

What's The Opportunity In SigmaRoc?

According to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that SigmaRoc’s ratio of 60.13x is above its peer average of 15.24x, which suggests the stock is trading at a higher price compared to the Basic Materials industry. But, is there another opportunity to buy low in the future? Given that SigmaRoc’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 SigmaRoc 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. With profit expected to more than double over the next couple of years, the future seems bright for SigmaRoc. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? It seems like the market has well and truly priced in SRC’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe SRC should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on SRC for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for SRC, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about SigmaRoc as a business, it's important to be aware of any risks it's facing. Our analysis shows 2 warning signs for SigmaRoc (1 is a bit concerning!) and we strongly recommend you look at them before investing.

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.

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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.

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