At UK£1.70, Is UP Global Sourcing Holdings plc (LON:UPGS) Worth Looking At Closely?

UP Global Sourcing Holdings plc (LON:UPGS), might not be a large cap stock, but it led the LSE gainers with a relatively large price hike in the past couple of weeks. 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 UP Global Sourcing Holdings’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for UP Global Sourcing Holdings

What's the opportunity in UP Global Sourcing Holdings?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’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 20.18x is currently trading slightly above its industry peers’ ratio of 17x, which means if you buy UP Global Sourcing Holdings today, you’d be paying a relatively sensible price for it. And if you believe that UP Global Sourcing Holdings should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. So, is there another chance to buy low in the future? Given that UP Global Sourcing Holdings’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.

Can we expect growth from UP Global Sourcing Holdings?

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. With profit expected to grow by 41% over the next couple of years, the future seems bright for UP Global Sourcing Holdings. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? It seems like the market has already priced in UPGS’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 UPGS? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on UPGS, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for UPGS, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing UP Global Sourcing Holdings at this point in time. In terms of investment risks, we've identified 3 warning signs with UP Global Sourcing Holdings, and understanding these should be part of your investment process.

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

If you decide to trade UP Global Sourcing Holdings, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted

This article by Simply Wall St is general in nature. 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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

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