At UK£0.60, Is It Time To Put SDI Group plc (LON:SDI) On Your Watch List?

SDI Group plc (LON:SDI), might not be a large cap stock, but it saw a decent share price growth of 16% on the AIM over the last few months. While good news for shareholders, the company has traded much higher in the past year. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Today we will analyse the most recent data on SDI Group’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for SDI Group

Is SDI Group Still Cheap?

Great news for investors – SDI Group is still trading at a fairly cheap price. According to our valuation, the intrinsic value for the stock is £0.78, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. However, given that SDI Group’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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of SDI Group look like?

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. In SDI Group's case, its earnings over the next year are expected to double, indicating an incredibly optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? Since SDI is currently undervalued, it may be a great time to increase your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on SDI for a while, now might be the time to make a leap. Its prosperous future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy SDI. 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 buy.

If you'd like to know more about SDI Group as a business, it's important to be aware of any risks it's facing. In terms of investment risks, we've identified 4 warning signs with SDI Group, and understanding these should be part of your investment process.

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

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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.

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