When Should You Buy iomart Group plc (LON:IOM)?

While iomart Group plc (LON:IOM) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the AIM, rising to highs of UK£3.37 and falling to the lows of UK£2.83. 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 iomart Group's current trading price of UK£3.00 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 iomart Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for iomart Group

Is iomart Group still cheap?

Good news, investors! iomart Group is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that iomart Group’s ratio of 28.49x is below its peer average of 50.7x, which indicates the stock is trading at a lower price compared to the IT industry. What’s more interesting is that, iomart Group’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to move closer to its industry peers, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

What does the future of iomart Group look like?

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. However, with a relatively muted profit growth of 4.1% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for iomart Group, at least in the short term.

What this means for you:

Are you a shareholder? Even though growth is relatively muted, since IOM is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on IOM for a while, now might be the time to make a leap. Its future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy IOM. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.

If you want to dive deeper into iomart Group, you'd also look into what risks it is currently facing. While conducting our analysis, we found that iomart Group has 2 warning signs and it would be unwise to ignore these.

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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.
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