Should You Investigate FDM Group (Holdings) plc (LON:FDM) At UK£9.94?

FDM Group (Holdings) plc (LON:FDM), is not the largest company out there, but it received a lot of attention from a substantial price movement on the LSE over the last few months, increasing to UK£10.80 at one point, and dropping to the lows of UK£9.59. 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 FDM Group (Holdings)'s current trading price of UK£9.94 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 FDM Group (Holdings)’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 FDM Group (Holdings)

What's the opportunity in FDM Group (Holdings)?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 15.03% above my intrinsic value, which means if you buy FDM Group (Holdings) today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is £8.64, there’s only an insignificant downside when the price falls to its real value. So, is there another chance to buy low in the future? Given that FDM Group (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.

What kind of growth will FDM Group (Holdings) generate?

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. FDM Group (Holdings)'s earnings over the next few years are expected to increase by 27%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? FDM’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping tabs on FDM, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, 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 FDM Group (Holdings) at this point in time. Every company has risks, and we've spotted 1 warning sign for FDM Group (Holdings) you should know about.

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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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