What Is Vivo Energy plc's (LON:VVO) Share Price Doing?

By
Simply Wall St
Published
October 03, 2021
LSE:VVO
Source: Shutterstock

While Vivo Energy plc (LON:VVO) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the LSE, rising to highs of UK£1.14 and falling to the lows of UK£0.96. 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 Vivo Energy's current trading price of UK£1.04 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 Vivo Energy’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Vivo Energy

What is Vivo Energy worth?

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. 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 12.46x is currently trading slightly above its industry peers’ ratio of 11.12x, which means if you buy Vivo Energy today, you’d be paying a relatively sensible price for it. And if you believe Vivo Energy 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. Is there another opportunity to buy low in the future? Since Vivo Energy’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.

What does the future of Vivo Energy look like?

earnings-and-revenue-growth
LSE:VVO Earnings and Revenue Growth October 4th 2021

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. With profit expected to grow by 31% over the next couple of years, the future seems bright for Vivo Energy. 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 VVO’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 VVO? 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 VVO, 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 VVO, 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.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Every company has risks, and we've spotted 2 warning signs for Vivo Energy you should know about.

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

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