PetroNeft Resources plc (ISE:P8ET), an energy company based in Ireland, led the ISE gainers with a relatively large price hike in the past couple of weeks. 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? Let’s take a look at PetroNeft Resources’s outlook and value based on the most recent financial data to see if the opportunity still exists. View our latest analysis for PetroNeft Resources
Is PetroNeft Resources still cheap?According to my relative valuation model, the stock seems to be currently fairly priced. I’ve used the price-to-book ratio in this instance because there’s not enough visibility to forecast its cash flows, and its earnings doesn’t seem to reflect its true value. The stock’s ratio of 0.32x is currently trading slightly below its industry peers’ ratio of 1.29x, which means if you buy PetroNeft Resources today, you’d be paying a relatively fair price for it. And if you believe PetroNeft Resources should be trading in this range, then there isn’t much room for the share price grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since PetroNeft Resources’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 kind of growth will PetroNeft Resources 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. PetroNeft Resources’s revenue growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. Unless expenses grow at the same level, or higher, this top-line growth should lead to robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has already priced in P8ET’s positive outlook, with shares trading around its fair value. 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 P8ET? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping an eye on P8ET, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for P8ET, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on PetroNeft Resources. You can find everything you need to know about PetroNeft Resources in the latest infographic research report. If you are no longer interested in PetroNeft Resources, you can use our free platform to see my list of over 50 other stocks with a high growth potential.