Why SigmaRoc plc (LON:SRC) Could Be Worth Watching

SigmaRoc plc (LON:SRC), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the AIM over the last few months. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. 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. However, what if the stock is still a bargain? Let’s take a look at SigmaRoc’s outlook and value based on the most recent financial data to see if the opportunity still exists.

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Is SigmaRoc Still Cheap?

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 42.22x is above its peer average of 19.73x, 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? Since SigmaRoc’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. 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.

Check out our latest analysis for SigmaRoc

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. 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 above industry price multiples. At this current price, shareholders may be asking a different question – should I 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 optimistic prospect 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. For instance, we've identified 2 warning signs for SigmaRoc (1 is a bit unpleasant) you should be familiar with.

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.