Is It Too Late To Consider Buying Supreme Plc (LON:SUP)?

Supreme Plc (LON:SUP), is not the largest company out there, but it saw a double-digit share price rise of over 10% in the past couple of months on the AIM. While good news for shareholders, the company has traded much higher in the past year. 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 Supreme’s outlook and value based on the most recent financial data to see if the opportunity still exists.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

Is Supreme Still Cheap?

According to our valuation model, Supreme seems to be fairly priced at around 4.7% below our intrinsic value, which means if you buy Supreme today, you’d be paying a fair price for it. And if you believe the company’s true value is £1.63, then there’s not much of an upside to gain from mispricing. Is there another opportunity to buy low in the future? Since Supreme’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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.

See our latest analysis for Supreme

What does the future of Supreme look like?

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 a negative profit growth of -9.2% expected next year, near-term growth certainly doesn’t appear to be a driver for a buy decision for Supreme. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Currently, SUP appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on SUP for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on SUP should the price fluctuate below its true value.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For instance, we've identified 2 warning signs for Supreme (1 can't be ignored) you should be familiar with.

If you are no longer interested in Supreme, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.