Cembre S.p.A. (BIT:CMB), is not the largest company out there, but it saw a double-digit share price rise of over 10% in the past couple of months on the BIT. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine Cembre’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
See our latest analysis for Cembre
What's the opportunity in Cembre?
Good news, investors! Cembre 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 Cembre’s ratio of 21.15x is below its peer average of 28.73x, which indicates the stock is trading at a lower price compared to the Electrical industry. Although, there may be another chance to buy again in the future. This is because Cembre’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will Cembre generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Cembre'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? Since CMB is currently trading below the industry PE ratio, it may be a great time to accumulate more of 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 price multiple.
Are you a potential investor? If you’ve been keeping an eye on CMB 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 CMB. 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 Cembre, you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 1 warning sign with Cembre, and understanding this should be part of your investment process.
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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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About BIT:CMB
Cembre
Engages in the manufacture and sale of electrical connectors, cable accessories, and related tools in Italy, the rest of Europe, and internationally.
Flawless balance sheet average dividend payer.
