At UK£9.74, Is Ergomed plc (LON:ERGO) Worth Looking At Closely?

While Ergomed plc (LON:ERGO) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the AIM, rising to highs of UK£13.36 and falling to the lows of UK£9.74. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Ergomed's current trading price of UK£9.74 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Ergomed’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Ergomed

What's The Opportunity In Ergomed?

According to my valuation model, Ergomed seems to be fairly priced at around 7.5% below my intrinsic value, which means if you buy Ergomed today, you’d be paying a fair price for it. And if you believe that the stock is really worth £10.53, then there isn’t much room for the share price grow beyond what it’s currently trading. What's more, Ergomed’s share price may be more stable over time (relative to the market), as indicated by its low beta.

What does the future of Ergomed look like?

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. With profit expected to grow by 75% over the next couple of years, the future seems bright for Ergomed. 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? ERGO’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 tabs on ERGO, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you want to dive deeper into Ergomed, you'd also look into what risks it is currently facing. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Ergomed.

If you are no longer interested in Ergomed, 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.