Stock Analysis

At UK£0.85, Is Angling Direct plc (LON:ANG) Worth Looking At Closely?

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AIM:ANG
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While Angling Direct plc (LON:ANG) might not be the most widely known stock at the moment, it saw a decent share price growth in the teens level on the AIM over the last few months. Less-covered, small caps sees 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? Let’s examine Angling Direct’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Angling Direct

Is Angling Direct still cheap?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Angling Direct’s ratio of 25.53x is trading slightly above its industry peers’ ratio of 23.42x, which means if you buy Angling Direct today, you’d be paying a relatively reasonable price for it. And if you believe Angling Direct should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. So, is there another chance to buy low in the future? Given that Angling Direct’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Angling Direct generate?

earnings-and-revenue-growth
AIM:ANG Earnings and Revenue Growth May 13th 2021

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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Angling Direct's revenue growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. Unless expenses grow at the same level, or higher, this top-line growth should lead to robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has already priced in ANG’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at ANG? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on ANG, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for ANG, which means it’s worth diving deeper into 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 Angling Direct, you'd also look into what risks it is currently facing. Our analysis shows 3 warning signs for Angling Direct (1 is a bit concerning!) and we strongly recommend you look at them before investing.

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