Is There Now An Opportunity In TheWorks.co.uk plc (LON:WRKS)?

TheWorks.co.uk plc (LON:WRKS), is not the largest company out there, but it received a lot of attention from a substantial price increase on the AIM over the last few months. The recent jump in the share price has meant that the company is trading at close to its 52-week high. 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? Let’s take a look at TheWorks.co.uk’s outlook and value based on the most recent financial data to see if the opportunity still exists.

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What Is TheWorks.co.uk Worth?

Great news for investors – TheWorks.co.uk is still trading at a fairly cheap price according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. We’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 2.85x is currently well-below the industry average of 23.9x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, TheWorks.co.uk’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. 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.

Check out our latest analysis for TheWorks.co.uk

Can we expect growth from TheWorks.co.uk?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. However, with an expected decline of -0.7% in revenues over the next year, short term growth isn’t a driver for a buy decision for TheWorks.co.uk. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Although WRKS is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to WRKS, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping tabs on WRKS for some time, but hesitant on making the leap, we recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For instance, we've identified 4 warning signs for TheWorks.co.uk (1 is significant) you should be familiar with.

If you are no longer interested in TheWorks.co.uk, 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.