Should You Investigate Topps Tiles Plc (LON:TPT) At UK£0.66?

Topps Tiles Plc (LON:TPT), is not the largest company out there, but it saw significant share price movement during recent months on the LSE, rising to highs of UK£0.76 and falling to the lows of UK£0.66. 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 Topps Tiles' current trading price of UK£0.66 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 Topps Tiles’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Topps Tiles

What is Topps Tiles worth?

Topps Tiles appears to be overvalued by 32% at the moment, based on my discounted cash flow valuation. The stock is currently priced at UK£0.66 on the market compared to my intrinsic value of £0.50. This means that the buying opportunity has probably disappeared for now. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Topps Tiles’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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of Topps Tiles 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. Topps Tiles' 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? TPT’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe TPT 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. 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 TPT for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for TPT, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about Topps Tiles as a business, it's important to be aware of any risks it's facing. In terms of investment risks, we've identified 1 warning sign with Topps Tiles, and understanding this should be part of your investment process.

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

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.

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