Is Now The Time To Look At Buying System1 Group PLC (LON:SYS1)?

System1 Group PLC (LON:SYS1), is not the largest company out there, but it saw a significant share price rise of over 20% in the past couple of months on the AIM. 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? Let’s take a look at System1 Group’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for System1 Group

Is System1 Group still cheap?

Good news, investors! System1 Group 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 14.42x is currently well-below the industry average of 23.36x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, System1 Group’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. 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 System1 Group 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. However, with a relatively muted revenue growth of 4.0% expected in the upcoming year, short term growth doesn’t seem like a key driver for a buy decision for System1 Group.

What this means for you:

Are you a shareholder? Even though growth is relatively muted, since SYS1 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 SYS1 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 SYS1. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed assessment.

So while earnings quality is important, it's equally important to consider the risks facing System1 Group at this point in time. For example, System1 Group has 4 warning signs (and 1 which is a bit unpleasant) we think you should know about.

If you are no longer interested in System1 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.