Why 4imprint Group plc (LON:FOUR) Could Be Worth Watching

4imprint Group plc (LON:FOUR), might not be a large cap stock, but it led the LSE gainers with a relatively large price hike in the past couple of weeks. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s examine 4imprint Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for 4imprint Group

Is 4imprint Group still cheap?

According to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. 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 38.73x is currently well-above the industry average of 19.69x, meaning that it is trading at a more expensive price relative to its peers. But, is there another opportunity to buy low in the future? Since 4imprint Group’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.

What kind of growth will 4imprint Group 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 grow by 34% over the next couple of years, the future seems bright for 4imprint Group. 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? FOUR’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 FOUR 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 an eye on FOUR for a while, 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 FOUR, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. To that end, you should learn about the 2 warning signs we've spotted with 4imprint Group (including 1 which is concerning).

If you are no longer interested in 4imprint 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. 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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