First Property Group plc (LON:FPO), a real estate company based in United Kingdom, saw a significant share price rise of over 20% in the past couple of months on the AIM. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Today I will analyse the most recent data on First Property Group’s outlook and valuation to see if the opportunity still exists. Check out our latest analysis for First Property Group
Is First Property Group still cheap?According to my valuation model, the stock is currently overvalued by about 34.56%, trading at UK£0.59 compared to my intrinsic value of £0.44. This means that the buying opportunity has probably disappeared for now. In addition to this, it seems like First Property Group’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
What kind of growth will First Property 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. However, with an expected decline of -5.32% in revenues over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for First Property Group. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? If you believe FPO should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. Given the uncertainty from negative growth in the future, this could be the right time to de-risk your portfolio. 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 FPO for a while, now may not be the best time to enter into the stock. Its price has risen beyond its true value, on top of a negative future outlook. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Should the price fall in the future, will you be well-informed enough to buy?
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on First Property Group. You can find everything you need to know about First Property Group in the latest infographic research report. If you are no longer interested in First Property Group, you can use our free platform to see my list of over 50 other stocks with a high growth potential.