Is Ideagen plc (LON:IDEA) Potentially Undervalued?

While Ideagen plc (LON:IDEA) might not be the most widely known stock at the moment, it saw a decent share price growth in the teens level on the AIM over the last few months. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Let’s take a look at Ideagen’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for Ideagen

What is Ideagen worth?

According to my valuation model, Ideagen seems to be fairly priced at around 1.3% below my intrinsic value, which means if you buy Ideagen today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth £2.30, then there’s not much of an upside to gain from mispricing. What's more, Ideagen’s share price may be more stable over time (relative to the market), as indicated by its low beta.

What kind of growth will Ideagen generate?

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. Though in the case of Ideagen, it is expected to deliver a highly negative earnings growth in the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What this means for you:

Are you a shareholder? IDEA seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in 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 tabs on IDEA for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The stock appears 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 gel your views on IDEA 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 example, Ideagen has 3 warning signs (and 1 which is significant) we think you should know about.

If you are no longer interested in Ideagen, 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.